Intel Corporation (INTC Quick QuoteINTC - Free Report) reported soft third-quarter 2024 results owing to high impairment and restructuring charges related to cost reduction and portfolio rationalization efforts. Despite solid traction from an accelerated ramp-up of artificial intelligence (AI) PCs, margins were significantly affected by initiatives to drive operational efficiency and agility, and accelerate profitable growth. The top line beat the Zacks Consensus Estimate but the bottom line missed the same.

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Intel has made significant strides in its cost-cutting plan to rebuild a sustainable growth engine. Following the quarterly results, shares were up in after-market trading on a favorable outlook.

Net Income

The company reported a GAAP loss of $16.6 billion or a loss of $3.88 per share against a net income of $0.3 billion or 7 cents per share in the year-ago quarter. The loss was attributable to $15.9 billion of impairment charges and $2.8 billion of restructuring charges. 

Excluding non-recurring items, non-GAAP loss in the reported quarter was $2 billion or a loss of 46 cents per share against a non-GAAP net income of $1.7 billion or 41 cents per share a year ago. The bottom line was wider than the Zacks Consensus Estimate of a loss of 3 cents.

Revenues

GAAP revenues in the reported quarter were $13.28 billion, down from $14.16 billion a year ago. The quarterly revenues were above the mid-point of the guided range and beat the consensus estimate of $13.01 billion. The company witnessed healthy growth momentum in its core x86 architecture and strong interests in the Intel 18A process node. Management envisions robust growth opportunities with a strong product roadmap and semiconductor ecosystem, likely setting it apart from the competition.

Segment Performance

Client Computing Group (CCG) revenues decreased 7% year over year to $7.3 billion as customers reduced inventory levels owing to macroeconomic headwinds as shipments to China reduced more than 50%. However, Intel witnessed healthy traction in AI PCs that has taken the market by storm and remains firmly on track to ship more than 100 million by 2025. The company launched Intel Core Ultra 200V series processors (formerly named Lunar Lake) during the quarter and Arrow Lake after the end of the quarter, bringing the power of the AI PC to the desktop and paving the path toward the launch of Panther Lake in the second half of 2025.

Datacenter and AI Group (DCAI) revenues improved 9% year over year to $3.3 billion owing to solid progress in Intel Xeon processors. Intel Xeon 6 processors with Performance-cores (P-cores), code-named Granite Rapids were launched in the quarter, along with the Intel Gaudi 3 AI accelerator.

Network and Edge Group (NEX) revenues increased 4% to $1.5 billion with significant design wins driven by a healthy recovery in business enterprise demand. 

While total Intel Products revenues were down 2% to $12.2 billion, Intel Foundry revenues decreased to $4.4 billion from $4.7 billion. All Other revenues, which include Altera, Mobileye and Other businesses, decreased to $1 billion from $1.5 billion a year ago.

Other Operating Details

Non-GAAP gross margin declined to 18% from 45.8% a year ago, while non-GAAP operating margin was down from 13.6% to -17.8%. Margins were significantly hurt by impairment charges and restructuring costs for a structural and operating realignment across the company. These included significant reductions in headcount, operating expenses and capital expenditures.

Intel has retrenched a massive workforce during the quarter and remains on track for more than a 15% workforce reduction before the end of the year. The company has reduced its capital expenditures by 20% since the beginning of the year and is focusing on simplifying parts of its portfolio to unlock efficiencies and create value.

Cash Flow & Liquidity

As of Sept. 31, 2024, Intel had cash and cash equivalents of $8.78 billion, with $46.47 billion of long-term debt. In the first nine months of 2024, Intel generated $5.1 billion of cash from operating activities compared with $6.8 billion a year ago.

Outlook

For the fourth quarter of 2024, Intel expects GAAP revenues to be within $13.3-$14.3 billion. The company expects CCG sales to be up sequentially and relatively flat across DCAI and NEX businesses. Non-GAAP gross margin is likely to be 39.5%. Non-GAAP earnings are expected to be around 12 cents per share.

Zacks Rank

Intel currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Arista Networks Inc. (ANET Quick QuoteANET - Free Report) is scheduled to release third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for earnings is pegged at $2.08 per share, suggesting a growth of 13.7% from the year-ago reported figure.

Arista has a long-term earnings growth expectation of 17.2%. ANET delivered an average earnings surprise of 15% in the last four reported quarters.

Akamai Technologies, Inc. (AKAM Quick QuoteAKAM - Free Report) is slated to release third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for earnings is pegged at $1.59 per share, indicating a decline of 2.4% from the year-ago reported figure.

Akamai has a long-term earnings growth expectation of 7.1%. AKAM delivered an average earnings surprise of 4.7% in the last four reported quarters.

Pinterest, Inc. (PINS Quick QuotePINS - Free Report) is set to release third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for earnings is pegged at 34 cents per share, implying a growth of 21.4% from the year-ago reported figure.

Pinterest has a long-term earnings growth expectation of 33%. PINS delivered an average earnings surprise of 20.9% in the last four reported quarters.