Intel fights to get its mojo back with drastic cuts and restructuring, while Microsoft strolls into the AI sunset without a care.
Intel’s latest earnings report isn’t exactly a victory lap—it’s more like a roll down a steep hill. Once the king of chips, Intel is now scrambling to regain relevance as its Q3 2024 earnings reveal a company caught in a tightening squeeze. With revenue rising to $13.28 billion, but still facing a net loss of $16.6 billion, the tech giant is in serious self-help mode, banking on restructuring and cost-slashing to climb back up. So, let’s dig into what Intel is up to as it tries to pull itself up by the bootstraps in a market that’s zooming forward at breakneck speed.
Intel shares pop 12% on earnings beat, uplifting guidance https://t.co/x237C3Whq0
— CNBC (@CNBC) October 31, 2024
Revenue: The Sinking Ship
Intel’s revenue picture isn’t exactly rosy. The haul in Q3, a 6% year over year decline, represents a decline that has Wall Street raising eyebrows and Intel reaching for the repair kit. Turns out, selling chips isn’t quite as lucrative when every competitor out there is beating you to the latest tech trends. Both the Client Computing and Datacenter and AI segments are facing declines, making it look like Intel’s fabled dominance is more of a distant memory. And with fierce competition in every corner of the market, Intel’s recovery plan isn’t going to be a walk in the park—it’s going to be more like scaling Everest with a boulder on its back. But despite all this, Intel shares rose 7% in Thursday extended trading, it wasn’t as bad as it could have been. Why?
Cost-Cutting: Intel’s Belt-Tightening Bonanza
In response to its lagging performance, Intel’s CEO Pat Gelsinger is going full austerity, aiming to slash up to $10 billion in operating costs over the next three years. The plan? Strip down Intel’s bloated cost structure and focus on core strengths. This is a move that may bring Intel back to basics, but it’s also a gamble that could leave the company stretched thin as it fights to stay in the game. It’s as if Intel is trying to reinvent itself by trimming off everything that doesn’t absolutely need to be there—kind of like chopping off the sleeves to make a jacket “summer-friendly.” The company has its sights set on becoming a leaner, meaner tech machine, but whether this will be a quick fix or a painful reset is anyone’s guess.
Chasing AI: Playing Catch-Up in Microsoft’s Shadow
One of the biggest elephants in Intel’s conference room is artificial intelligence. Rivals like NVIDIA and Microsoft are way ahead in the artificial intelligence (AI ) game, making Intel’s efforts feel more like it’s trying to join a party that started hours ago. Microsoft, in particular, is soaking up the AI spotlight, fresh off a Q1 earnings win with solid cloud growth and a relentless focus on AI-driven products. While Intel scrambles to refocus its Datacenter and AI segment, Microsoft is effortlessly cruising along, rumor has it that it can’t build data centers fast enough, proving once again that being late to the AI party doesn’t cut it in today’s tech landscape.
In fact, the contrast here is hard to ignore. Microsoft is reaping the rewards of its big bets on cloud and AI, basking in investor applause while Intel is stuck in “catch-up” mode. It’s like watching an Olympic sprinter effortlessly finish a race while the rest of the pack is still tying their shoes.
Hope on the Horizon?
Intel’s not ready to throw in the towel just yet. Amidst the challenges, there are glimmers of hope. The company is pinning some of its future on partnerships and foundry services, hoping to transform into a one-stop shop for other tech firms needing chip manufacturing. This is part of its long-term strategy to diversify revenue streams and insulate itself from the fierce competition in consumer and data center markets. Intel is aiming to become the “go-to foundry” for a host of other tech companies—a bold move that could stabilize the ship or, let’s be real, be a whole new adventure in overextending.
Sure, it’s a smart pivot, but it’s also Intel’s way of hedging its bets: if it can’t keep up in the direct-to-consumer market, it’s going to try and become the market itself. The shift could pay off if Intel manages to make this foundry-first approach work, but that’s a big if, considering how competitive and cost-intensive the foundry business is.
While Intel Struggles, Microsoft Shows How It’s Done
LISTEN NOW: Jim Cramer and Scott Wapner discuss the "Magnificent 7" earnings front: Meta and Microsoft shares under pressure as guidance related to AI overshadowed better-than-expected profits and revenue. Listen and follow the @SquawkStreet podcast here: https://t.co/FZ7yRasmzi pic.twitter.com/gaHNKNaG8R
— CNBC (@CNBC) October 31, 2024
In the end, Intel’s latest earnings read like a cautionary tale for tech giants who are finding it hard to keep up with rapid innovation. Where Intel is busy trimming down and “right-sizing,” Microsoft has long embraced the forward momentum, diving headfirst into AI and cloud computing and coming out on top. If Intel’s Q3 report is any indication, the chipmaker has some serious legwork to do. Meanwhile, Microsoft’s smooth-as-silk earnings suggest that, in the high-speed world of tech, you either evolve or watch from the sidelines. Microsoft’s revenue increased 16% year over year for the quarter, according to a statement. Net income rose 11% to $24.67 billion from $22.29 billion from a year ago.
So, can Intel muscle its way back to relevance, or will it keep playing catch-up while rivals like Microsoft revel in their lead? For now, the chip giant might want to take a few notes from Microsoft’s playbook: sometimes, the best way to survive is to sprint ahead of the pack.
LISTEN NOW: Jim Cramer and Scott Wapner discuss the "Magnificent 7" earnings front: Meta and Microsoft shares under pressure as guidance related to AI overshadowed better-than-expected profits and revenue. Listen and follow the @SquawkStreet podcast here: https://t.co/FZ7yRasmzi pic.twitter.com/gaHNKNaG8R
— CNBC (@CNBC) October 31, 2024
And this rounds up our coverage of big tech's earnings.
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