Intel Losses Hit $16.6B In Q3 And Wall Street Is … Loving It?

Intel posted a $16.6 billion loss in the third quarter – the largest in the silicon veteran's history – as it booked more than $18 billion in restructuring and impairment related charges.

While the loss was obviously not what Intel wanted, revenues for the quarter came in at the upper end of forecasts at $13.3 billion – up four percent from last quarter, though still down six percent from last year.

Executives expect Intel to continue to rebound in the fourth quarter, forecasting revenues of between $13.3 and $14.3 billion – a decrease of 7.14 and 13.6 percent year over year. In spite of this, the prospect of another flat to positive quarter of sequential revenue growth was enough to send the embattled chipmaker's share price skyward.

Intel's share price surged by up to 15 percent in after-hours trading on what investors saw as a positive outlook. However the biz has fallen a long way from its glory days, and faces numerous challenges with respect to ongoing restructuring costs which are expected to challenge profitability again in the third quarter.

The largest loss in Intel history

During the third quarter, Intel faced in excess of 18.5 billion dollars in charges associated in part with its plan to cut 10 billion in annual spending – announced amid mass layoffs last quarter.

As you might expect, cutting 15,000 staff by the end of the year will save Intel a boatload of cash in the future. But in the short term it must write many severance and early retirement checks.

According to CEO Pat Gelsinger, the bulk of the layoffs occurred during the quarter – but even this only accounted for $2.2 billion of the charges. Another $528 million of restructure-related costs were somewhat vaguely attributed to "non-cash charges."

The largest of the losses were instead driven by the decision to write off $9.9 billion worth of deferred tax assets accumulated over the past three years of losses, CFO David Zinsner explained.

Chipzilla also faced $3.1 billion of impaired charges related to Intel 7 manufacturing equipment – which cannot be used for more advanced process nodes like Intel 18A that rely on more modern extreme ultraviolet lithography equipment.

Intel also booked a $2.9 billion charge associated with the "impairment goodwill for certain reporting units," that was largely attributed to autonomous driving tech unit Mobileye.

Combined, these factors contributed to a $16.6 billion quarterly loss. Zinsner warned more red ink will come in Q4.

Ever the optimist, Gelsinger couldn't help but put a positive spin on the ordeal. He declared that that Intel is well on its way to "completing what will be one of the most seminal restructurings in the history [of the company]. The steps that we took in our financial restructuring this quarter was very critical to be able to bring us to a point where we can say we have capacity to drive long-term shareholder return."

• Samsung blames 'one-off costs' as Q3 chip profits plummet 40%
• Microsoft turning away AI training workloads – inferencing makes better money
• AMD teases its GPU biz 'approaching the scale' of CPU operations
• Alphabet posts big revenue and profit growth, just 1,100 job losses

Q3 revenues still down from last year

During the third quarter, Intel saw modest revenue growth across its various divisions – at least on a sequential basis. Intel Products – which includes Client, Datacenter, and Networking – grew 3.3 percent as a whole while Intel foundry was up 2.2 percent compared to last quarter.

However, compared to this time last year, revenues remain depressed with Product and Foundry down 2 percent and 8 percent respectively – showing that the chipmaker is still a long way from recovery

Digging a little deeper we see that this decline isn't entirely uniform. While client computing revenues were down seven percent year over year to $7.3 billion in Q3, datacenter sales grew by nine percent compared to last year, bringing in $3.3 billion.

Intel's networking group also saw modest gains during the quarter, with revenues up four percent year on year to $1.5 billion.

The same can't be said of Intel's Altera FPGA business, which saw revenues fall 44 percent from the year ago quarter to $412 million. Mobileye revenues weren't nearly so bad, but still fell eight percent year over year in the third quarter.

Gelsinger tried to rally the troops: "Q3 was a good step. Now we need to finish the year strong and prepare for 2025." ®