Intel today reported its Q3 earnings, and while the company beat estimates on both revenues and earnings, it also said that it would be raising its restructuring charges to an eye-watering $2.3 billion, as it continues to shift its business away from PC processors and into chips for the next generation of computing in devices like drones and self-driving cars. It also provided a forecast for the next quarter that it said was lower than average for the company.
The semiconductor giant reported revenues of $15.8 billion on non-GAAP earnings per share of 80 cents. Both numbers exceeded analysts’ average estimates of $15.58 billion in sales and EPS of 72 cents.
“It was an outstanding quarter, and we set a number of new records across the business,” said Brian Krzanich, Intel CEO, in a statement. “In addition to strong financials, we delivered exciting new technologies while continuing to align our people and products to our strategy. We’re executing well, and these results show Intel’s continuing transformation to a company that powers the cloud and billions of smart, connected devices.”
That may be the case, but Intel also noted that restructuring would be higher than it had originally projected last quarter.
“Total Restructuring and Other charges”, Intel said, are now expected to be $2.3 billion, with the “majority of the remaining charges to be realized between now and the middle of 2017.” Some $1.8 billion has been cut to-date with another $250 million going in Q4.
And the pressure will continue to pile on Intel as the year wears on. A letter from CFO Stacey Smith notes that the forecast for Q4 is for revenues of $15.7 billion, “flat to the third quarter” and “lower than the average seasonal increase for the fourth quarter.”
Among Intel’s existing divisions, in September it announced that it would be spinning out its McAfee security group in a partnership with TPG. And although the company is building new lines of business, the bulk is still coming from its older and traditional lines:
• Client Computing Group revenue of $8.9 billion, up 21 percent sequentially and up 5 percent year-over-year
• Data Center Group posted revenue of $4.5 billion, up 13 percent sequentially and up 10 percent year-over-year
Meanwhile, newer areas are significantly smaller. For example, the Internet of Things Group posted revenue of $689 million, up 20 percent sequentially and up 19 percent year-over-year.Featured Image: Sean Gallup / Staff/Getty Images