Intel's Q3 Profit Surge; After-Hours Stock Up 7%

Intel, a prominent player in the electronics component industry, has released its financial report for the third quarter of 2023. Despite experiencing a persistent decline in revenue over the past seven quarters, Intel posted a revenue of $14.2 billion, marking an 8% year-on-year reduction. Notably, this figure exceeded the revenue expectation of $13.53 billion by LSEG (formerly known as Refinitiv).

Delving into the non-GAAP metrics, Intel's gross profit margin for the third quarter stood at 45.8%, representing a marginal 0.1% decrease from the corresponding period last year. The net profit reached $1.7 billion, indicating a robust 14% year-on-year increase. Furthermore, the earnings per share reached $0.41, surpassing LSEG's projection of $0.22 per share and also exceeding the previous year's figure of $0.37 per share.

Intel's various business segments exhibited varying revenue performances during this quarter. The Customer Compute business, encompassing processor operations, reported $7.9 billion in revenue, reflecting a 3% year-on-year decline. The Data Center and AI operations generated $3.8 billion, showing a 10% decrease. The Network and Edge Computing sector contributed $1.5 billion, marking a 32% year-on-year decline. In contrast, the Mobileye autonomous driving division reported $530 million in revenue, showcasing a notable 18% year-on-year growth. Furthermore, Intel Foundry Services, the company's contract manufacturing division, reported $3.11 billion in revenue, an impressive 299% year-on-year increase.

During the earnings call, Intel's CEO, Pat Gelsinger, unveiled plans to implement cost-saving measures that are projected to reduce the company's expenses by approximately $3 billion this year. The CFO, David Zinsner, attributed the improved earnings per share to prudent expense management, with operating expenses down by 15%. The company's current workforce stands at 120,000 employees, a reduction from the 131,500 employees during the same period last year.

In a strategic move, Intel announced that its Programmable Solutions Group (PSG) will transition to independent operations starting next year. This move is anticipated to enhance the company's competitiveness in the Field Programmable Gate Array (FPGA) market and may pave the way for a future IPO.

Speculation has arisen regarding Nvidia and AMD developing Arm architecture processors to challenge Intel's position in the PC market. Pat Gelsinger dismissed these concerns, emphasizing that Arm-based processors have historically garnered limited attention in the market and have played a relatively minor role in the PC industry.

Looking forward, Intel anticipates a positive outlook for the fourth quarter, driven by improvements in the PC market and a more competitive product portfolio. The projected revenue falls within the range of $14.6 billion to $15.6 billion, surpassing the expectations of Bloomberg analysts, which were set at $14.4 billion. Earnings per share are estimated at $0.44, exceeding analysts' expectations of $0.31 per share.