Intel Corp. today delivered better-than-expected earnings results and issued guidance for the coming quarter that topped Wall Street’s estimates — and as a result its stock made sharp gains, giving the beleaguered chipmaker a welcome boost following months of inner turmoil.

The company reported third-quarter earnings before certain costs such as stock compensation of 17 cents per share, far surpassing analysts’ consensus estimate, which had called for a loss of two cents per share. Revenue for the period declined 6% year-over-year to $13.28 billion, but it still came in ahead of the Street’s $13.02 billion forecast.

All told, Intel delivered a net loss of $16.99 billion in the quarter, much higher than the $310 million profit it recorded in the same period one year earlier. However, most of those losses were inevitable, with the chipmaker recognizing $2.8 billon in restructuring charges during the quarter, as well as $15.9 billion in impairment charges tied to the depreciation of the Intel 7 process node and payments to the now-independent Mobileye business unit.

Investors were clearly willing to forgive those losses, linked to the company’s ongoing reorganization, as Intel’s stock quickly gained more than 6% in the extended trading session.

Intel Chief Executive Pat Gelsinger (pictured) told analysts on a conference call that the company is in the midst of the most fundamental reshaping of its business since it was established back in 1968.

In an Oct. 28 filing, Intel revealed that its board’s audit and finance committee has approved new cost and capital reduction activities, including plans to cut its headcount by 16,500 employees and reduce its real estate footprint. The job cuts were announced in August, and the process should be complete by the fourth quarter of 2025.

“The momentum we are building across our product portfolio to maximize the value of our x86 franchise, combined with the strong interest Intel 18A is attracting from foundry customers, reflects the impact of our actions and the opportunities ahead,” Gelsinger said in a statement.

Intel has endured a spectacular decline in recent years, losing market share in key markets like personal computer and data center chips, and failing abysmally in its efforts to make inroads in artificial intelligence. As a result, Intel has been forced to rethink its entire business model, and recently revealed plans to spin off its foundry business as an independent subsidiary. By doing that, Intel can focus more on its core business of chip design and development, and the foundry unit can seek outside funding sources.

The company is also seeking to make other changes, such as offloading a stake in its Altera chip unit, which makes specialized programmable processors that can provide faster performance than standard chips.

The turmoil at Intel has not gone unnoticed, and vultures are reported to be waiting in the wings. In September, it was reported that rival chipmaker Qualcomm Inc. had reached out to Intel to discuss a possible takeover, or acquisition of some of its business units. Intel is said to have responded by engaging with advisers to defend itself against such moves.

In today’s report, Intel said its client computing group, which sells chips for PCs, delivered $7.33 billion in revenue, down 7% from a year earlier and below the Street’s estimate of $7.39 billion.

In a conference call, Intel Chief Financial Officer Dave Zinsner said customers have been drawing down inventories that were previously built up following supply shortages. “We anticipate inventory normalization will continue through the first half of next year,” he said.

Intel’s data center and AI business segment did better, with sales there topping $3.35 billion, up 9% from a year earlier and above the Street’s call for $3.17 billion in revenue.

However, investors will be keenly aware that the bulk of the data center and AI business unit’s sales were not related to AI chips. The company has been under pressure to try and make more of an impact on the rapidly growing AI industry, and Intel responded with the launch of its next-generation Gaudi AI accelerators during the quarter.

In April, the company said it hoped to deliver $500 million in revenue from Gaudi in the second half of the year, but today it revealed that uptake of the new chips has been slower than expected. On the call, Gelsinger admitted that the company is “not going to achieve” the $500 million target.

Holger Mueller of Constellation Research Inc. said that although there were positives in the quarterly results, on the whole they show that Intel is still deep in trouble, even when taking out the costs of its restructuring. The biggest problem is that it has not found a new growth lever, as evidenced by its drop in revenue, he said. And although Pat Gelsinger is aware of the problem and knows he needs to reinvigorate the business, it’s not clear yet if he has anticipated a further slowdown in the company’s core business of selling PC chips.

“It’s clear that when Intel cannot find growth in desktop computing, it faces difficulties, even if its cloud-related sales are up by a respectable 9%,” Mueller said. “The problem is that cloud is less than 50% of its client computing revenues, so the growth there won’t be enough to help Intel avoid more overall revenue declines if the PC market doesn’t pick up.”

“Investors are waiting for Gelsinger to execute on the company’s transition plan, but it will take some time, and at the end of it he will have to find a way for the company to grow again,” he added.

Gelsinger also revealed his frustration over the U.S. government’s delay in providing the company with funding promised under the Chips and Science Act. In March, the White House said it would give Intel up to $8.5 billion in funding to help it build out its foundry infrastructure in the U.S., but the company has not yet seen any of that cash. “I’m frustrated that it’s been so slow to move forward,” Gelsinger admitted.

Despite its ongoing troubles, Intel seems to think the current quarter will be a bright spot. It offered a forecast of 12 cents per share in earnings and $13.3 billion to $14.3 billion in revenue. That’s better than expected, with Wall Street analysts targeting earnings of just eight cents per share on sales of $13.66 billion.

Intel called for fiscal fourth-quarter adjusted earnings of 12 cents per share and revenue between $13.3 billion and $14.3 billion. Analysts had expected eight cents in adjusted earnings per share and $13.66 billion in revenue.

Although Intel will be encouraged by today’s after-hours gain, it’s no doubt keenly aware that its stock is still down 57% in the year-to-date, while the broader S&P 500 Index is up 20% in the same period.

Photo: SiliconANGLE