Intel announces up to $10 billion in cost reductions through 2025
Intel CEO Pat Gelsinger speaks during the Mobileye Global Inc. IPO at the Nasdaq MarketSite in New York on Oct. 26, 2022. Mobileye Global Inc., the self-driving technology company owned by Intel Corp., priced one of the biggest US initial public offerings of the year above its marketed range to raise $861 million.
Michael Nagle | Bloomberg | Getty Images
Intel shares moved as much as 7% higher in extended trading on Thursday after the chipmaker announced lower-than-expected earnings guidance for the full fiscal year but said it will deliver up to $10 billion in cost reductions and efficiency improvements.
Here’s how the company did:
- Earnings: 59 cents per share, adjusted, vs. 32 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $15.34 billion, vs. $15.25 billion as expected by analysts, according to Refinitiv.
Overall revenue declined 15% year over year in the quarter, which ended on Oct. 1, according to a statement. In the previous quarter, revenue declined 22%. The company’s net income, at $1.02 billion, was down from $6.82 billion in the year-ago quarter.
Intel said it’s aiming for $3 billion in cost reductions in 2023, and the number will reach $8 billion to $10 billion in annualized reductions and gains by the end of 2025. Bloomberg reported earlier this month that Intel was planning to cut employees, possibly in the thousands, in a bid to lower costs. Days later the Oregonian reported that Intel CEO Pat Gelsinger warned employees that the company would be instituting cost-cutting measures.
The company’s Client Computing Group that includes PC chips generated $8.12 billion in revenue, down 17% but above the $7.58 billion consensus among analysts polled by StreetAccount. Technology industry researcher Gartner said that in the third quarter PC shipments declined almost 20%, after two years of consumers buying computers to work, study and play games from home during the pandemic.
Intel’s Datacenter and AI segment, including server chips, memory and field-programmable gate arrays, posted $4.21 billion in revenue, down 27% and lower than the StreetAccount consensus of $4.67 billion.
The Network and Edge segment segment that features networking products kicked in revenue of $2.27 billion, which was up 14% and less than the $2.40 billion StreetAccount consensus.
During the quarter Intel said MediaTek would rely on Intel Foundry Services for chip manufacturing, and the company broke ground on a production facility in a planned investment in Ohio exceeding $20 billion.
And on Wednesday Intel-backed autonomous-driving technology company Mobileye started trading on the Nasdaq. Intel bought it in 2017 and retains control of the company.
Management trimmed the forecast for the full fiscal year. The company now sees $1.95 in adjusted earnings per share and $63 billion to $64 billion in revenue, compared with $2.30 in adjusted earnings per share and $65 billion and $68 billion in revenue three months ago. That implies a decline in revenue of almost 20%. Analysts polled by Refinitiv had expected $2.15 in adjusted earnings per share and $65.26 billion in revenue.
Notwithstanding the after-hours move, Intel shares have fallen nearly 49% so far in 2022, while the S&P 500 index is down about 20% over the same period.
Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.
This is breaking news. Please check back for updates.
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