Intel Corporation (INTC) shares rallied on Friday after the chip giant delivered a better-than-expected third-quarter earnings report and provided an update on its ambitious $10 billion cost reduction plan. The company’s stock price rose significantly in after-hours trading, indicating investor confidence in Intel’s future prospects.
Despite a 6% year-over-year decline in sales, Intel managed to beat analysts’ expectations. The company reported a loss of 46 cents per share, which was better than the anticipated loss of two cents per share. Revenue came in at $13.28 billion, surpassing analysts’ estimates of $13.02 billion.
Intel broke down its third-quarter revenue across its various segments: $7.3 billion from the Client Computing Group, $3.3 billion from Data Center and Artificial Intelligence (AI), $1.5 billion from Network and Edge, $4.4 billion from Intel Foundry, and $1.03 billion from other revenue sources. Intersegment eliminations resulted in a $4.3 billion loss, however.
Looking ahead to the fourth quarter, Intel offered guidance that also exceeded analyst expectations. The company anticipates earnings per share (EPS) of 12 cents, compared to analyst estimates of eight cents, and sales between $13.3 billion and $14.3 billion, against analysts’ projections of $13.66 billion.
Intel CEO Pat Gelsinger emphasized the company’s progress in implementing its cost reduction plan, stating, “Our Q3 results underscore the solid progress we are making against the plan we outlined last quarter to reduce costs, simplify our portfolio and improve organizational efficiency. We delivered revenue above the midpoint of our guidance, and are acting with urgency to position the business for sustainable value creation moving forward.”
The cost reduction initiative involves structural and operational realignment, accompanied by reductions in headcount, operating expenses, and capital expenditures. As a result, Intel recognized $2.8 billion in restructuring charges. David Zinsner, Intel’s CFO, highlighted the impact of these charges on profitability, saying, “The restructuring charges meaningfully impacted Q3 profitability and that the actions we took this quarter position us for improved profitability and enhanced liquidity.”
Following the earnings release, several analysts adjusted their price targets for Intel shares. Needham analyst Quinn Bolton maintained a Hold rating on Intel. Rosenblatt analyst Hans Mosesmann kept a Sell rating but raised the price target from $17 to $20. Benchmark analyst Cody Acree also reiterated a Hold rating on Intel. Baird analyst Tristan Gerra upgraded his rating to Neutral and increased the price target from $20 to $25.
The positive earnings report and optimistic outlook coupled with the announcement of cost-cutting measures have sparked renewed investor confidence in Intel. The company’s future trajectory will be closely watched as it navigates the challenging semiconductor market landscape.
