Intel (INTC, Financial) saw a 7% increase today, despite reporting significant net losses in Q3, missing analyst expectations due to declining margins. The chip maker has faced a challenging year as competitors like Advanced Micro Devices (AMD, Financial) and NVIDIA (NVDA, Financial) have surged ahead in the AI sector. Intel struggles with a declining PC market, slow foundry growth, and rising costs.

In the last quarter, Intel announced major changes, including suspending its dividend and a cost-cutting plan with a 15% reduction in its workforce. Rumors have circulated about potential acquisitions, including interest from Qualcomm (QCOM, Financial) and possible divestment of its foundry business. Despite today's stock increase, Intel continues to trade within a narrow range.

• Intel reported a net loss of $0.46 per share in Q3, far below the expected $(0.03) per share, primarily due to a significant impairment related to Intel 7 equipment. This reflects excessive COVID-era spending that cannot transition to advanced nodes. Intel is moving towards EUV processing, which offers better performance than Intel 7.
• The losses also stem from aggressive cost-cutting measures. Intel completed most of its workforce reduction in Q3 and is on track to meet its 15% target by year-end. The company also cut its CapEx by over 20% from its initial plan. Intel is streamlining its portfolio, moving its edge business into the Client Computing Group (CCG) and focusing the Network and Edge (NEX) portfolio on networking and telecommunications.
• Intel reiterated its forecasts, expecting spending to decrease by over $10 billion by 2025, resulting in net CapEx of $12-14 billion. The company anticipates positive free cash flow in FY25 and projects a $0.12 adjusted EPS for Q4, supported by cost reduction progress.

Intel's Data Center and AI (DCAI) segment needs to improve its competitive position. In Q3, the segment saw a 9% revenue increase year-over-year to $3.3 billion, significantly lower than AMD's over 100% growth. Foundry revenue fell by 8% in Q3, with operating losses reaching $5.8 billion due to impairment charges. Intel expects similar loss levels in Q4, excluding impairment charges. The CCG segment reversed from last quarter, with a 7% revenue decline to $7.3 billion, highlighting ongoing customer inventory adjustments.

Intel remains on an ambitious turnaround path, focusing on cost reduction and technology improvements to enhance its AI business. However, reclaiming its position as a leading chip manufacturer is challenging, especially as competitors widen their lead.