Intel announced a significant $18.7 billion set of restructuring and asset impairment charges on Thursday in an effort to streamline its operations and boost its competitiveness. The chipmaker’s latest quarter saw a less severe revenue decline than expected, leading to a 10 per cent increase in its shares in after-market trading. The company’s forecast for the current quarter exceeded Wall Street estimates, with revenue expected to be between $13.3 billion and $14.3 billion and pro forma earnings per share of 12 cents.
The restructuring charges of $2.8 billion were related to a previously announced cost-cutting program aimed at reducing spending by $10 billion annually. Additionally, Intel took $15.9 billion in impairment charges on equipment and goodwill writedowns. While most of these costs were excluded from non-GAAP earnings, $3.1 billion of the charges were taken against non-GAAP profits, mainly due to a writedown of equipment acquired for chip production on the Intel 7 manufacturing node.
As a result, Intel reported a non-GAAP loss of 46 cents per share for the quarter, significantly higher than the expected loss of 2 cents. CFO David Zinsner attributed the $3.1 billion charge to Intel’s overestimation of future chip demand during the pandemic, leading to the purchase of excess equipment that was never utilized.
Excluding this charge, Intel would have reported non-GAAP earnings of 17 cents per share for the quarter. Despite a 6 per cent decline in revenue to $13.3 billion, the company’s performance was seen as positive, especially with the upcoming launch of key new chips such as Lunar Lake for AI PCs and Granite Rapids for servers.
The rebound in Intel’s shares provided a welcome relief after a year of significant stock price declines, signaling investor confidence in the company’s future prospects.