Intel’s $18.7B Restructuring Sparks 10% Stock Rally Amid Positive Revenue Surprise

News 01 Nov 2024

As much as $18.7bn in restructuring and asset impairment charges, Intel reported on Thursday in its attempt to clean the decks and accelerate efforts to rebuild competitiveness.

Better news on the revenue front than investors feared in the latest quarter spurred a 10 percent rebound in battered shares after market Thursday.

The quarterly revenue of between $13.3 billion and $14.2 billion with pro forma earnings per share of 12 cents will come above the forecasts at $13.6 billion in revenue and 8 cents in earnings, from analysts at Wall Street.

The costs included $2.8bn in restructuring expenses related to a restructuring and cost-cutting program already announced in advance, aimed at reducing the company’s spending by $10bn annually. Equipment and goodwill writedowns impairment charges totaled $15.9bn.

Most of the costs were excluded from the non-GAAP measure of earnings analysts use to judge the company’s underlying performance. However, $3.1bn of the charges, primarily a write-down of equipment acquired to make chips on the Intel 7 manufacturing node, ran against non-GAAP profits.

Chipmaker reported a loss of 46 cents per share for the quarter non-GAAP, more than the loss of 2 cents Wall Street expected. According to chief financial officer David Zinsner in the Financial Times, Intel had spent $3.1 billion, reflecting its excessive optimism over future demand for its chips during the pandemic by buying more equipment than needed. A lot of it never got unpacked, he said. “It was just sitting on the sidelines waiting to be used,” he said.

Save for that charge, Intel would have reported non-GAAP earnings of 17 cents a share for the quarter. Its revenue for the quarter fell 6% to $13.3bn but still topped expectations of about $13bn. Zinsner said that this quarterly performance showed that the company is on the right track with launching some essential new chips, which Wall Street perceives as critical to its competitiveness. These include a new chip for artificial intelligence PCs codenamed Lunar Lake, and a server chip called Granite Rapids.

The relief rally in its shares marks a respite after a selloff that had erased 55 % from its stock price this year, including a 26 %decline the day after its last earnings report.

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