Intel revenue hit by restructuring charges in Q3

The US vendor is still working on its $10bn cost reduction plan announced last quarter

Intel has announced a sharp decline compared with last year in its latest Q3 results as it trims partner investment among other costs.

Revenue was down six per cent to $13.3bn (£10.25bn) in Q3 FY24, compared with $14.2bn last year.

Gross margin also decreased by 27.5 per cent, falling to 15 per cent (previous year: 42.5 per cent).

GAAP earnings (loss) per share attributable to Intel was $3.88.

In the third quarter, the company generated $4.1bn in cash from operations and paid dividends of $0.5bn.

The company also announced it made progress on its $10bn cost reduction plan announced at the end of Q2 FY24.

The US-based vendor has taken drastic measures to reduce costs, including laying off 15,000 employees and cutting $10bn in costs by the end of the year, in response to what CEO Pat Gelsinger previously described as worsening financial conditions.

“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 organisational efficiency,” said Gelsinger.

The vendor has also decreased spending within its partner-centric sales and marketing group by more than 35 per cent.

“We delivered revenue above the midpoint of our guidance and are acting with urgency to position the business for sustainable value creation moving forward,” added Gelsinger.

This strategy, although necessary for Intel’s survival, has cost $2.8bn in restructuring charges in Q3 2024.

“Restructuring charges meaningfully impacted Q3 profitability as we took important steps toward our cost reduction goal,” said David Zinsner, CFO of Intel.

The results were also impacted by other charges, with $3.1bn of charges related to non-cash impairments and the acceleration of depreciation for certain manufacturing assets, $2.9bn linked to the impairment of goodwill for certain reporting units and acquired fixed assets, and $9.9bn related to the establishment of a valuation allowance against US deferred tax assets.

Looking into Q4 FY24, the company expects revenue to grow between $13.3bn and $14.3bn, driven by a variety of factors such as its IDM 2.0 strategy and Smart Capital strategy, partnerships with Apollo and Brookfield, and its AI strategy.

The company also said it’s on track to ship over 100 million AI PCs by the end of next year, as part of its plan to capture a bigger share of the AI wave.