Intel posts record $16.6 billion loss, but shares surge with investor optimism

Intel reported the largest loss in its history in its third-quarter earnings announcement, recording a staggering $16.6 billion deficit. Despite this, Intel's shares surged up to 15% in after-hours trading, reflecting investor confidence in the company's long-term recovery plan.

Lack of business not to blame for losses

While the loss is significant, Intel’s quarterly revenue hit $13.3 billion, reaching the upper end of forecasts. This marks a 4% increase from the previous quarter, though it’s still down 6% year-over-year. Encouraged by this stability, Intel’s executives project a similar revenue range for Q4, forecasting between $13.3 billion and $14.3 billion. If realized, it would represent another quarter of sequential growth, a trend that has increased investor optimism in Intel’s ongoing recovery.

Major Restructuring Underway

A portion of Intel’s loss can be attributed to its restructuring effort that includes a 15% reduction in its workforce. This translates to approximately 15,000 people. The move is projected to save the company $10 billion in annual spending but comes with short-term costs in the form of severance and early retirement payouts.

CFO David Zinsner also revealed that Intel decided to write off $9.9 billion worth of deferred tax assets accumulated over the last three years – a significant one-time charge meant to simplify Intel’s balance sheet moving forward.

Another substantial hit came from a $3.1 billion impairment charge on Intel 7 manufacturing equipment, which cannot be adapted for Intel’s next-gen 18A process nodes. Further weighing on the quarter was a $2.9 billion goodwill impairment charge tied to Intel’s autonomous driving tech unit, Mobileye, reflecting the difficulties in maintaining high valuations amid rapid industry changes.

Looking into the future

The pressure is now on the company’s CEO Pat Gelsinger who has maintained a positive outlook amid all this.“The steps that we took in our financial restructuring this quarter were very critical,” Gelsinger said. He framed the quarter’s losses as necessary steps toward “completing what will be one of the most seminal restructurings in the history of the company.