Intel announced the largest losses in its history. It’s actually an accounting mirage.

In its latest quarterly results, Intel announced the largest loss in its history: $16.6 billion, which it incurred in the third quarter of 2024. Never in her 56-year life had she shown such large losses. Fine print is important though.

Why is this important. That figure and the negative milestone reflect the transformation being experienced by Intel, which is struggling to maintain leadership in an increasingly competitive market now dominated by AI.

Panoramic. Intel is in the midst of one of the most significant restructurings in its history: laying off 15,000 employees and a cost-cutting plan that aims to cut $10 billion from its annual budget.

In numbers:

• Losses of 16.6 billion dollars. In the same quarter of 2023, he earned 297 million.
• Revenue $13.3 billion (-6% year-over-year).
• Market cap is $99 billion, below the psychological barrier of $100,000.
• Shares in free fall: -60% since 2021, when Gelsinger became CEO of the company.

behind the scenes. Most of the losses are related to accounting adjustments and reorganization costs. That is, extraordinary charges.

• $9.9 billion in deferred tax assets: Future tax benefits that Intel received from previous losses. They have been retired because Intel does not expect to make enough profit in the short term to be able to use them.
• $3.1 billion due to wear and tear on production equipment. That is, production equipment that no longer has the expected value and cannot adapt to new technologies. This is the one used in the Intel 7 process.
• 2,900 million in impairment of goodwill. It’s a way of acknowledging that it paid too much for some acquisitions, especially Mobileye, its self-driving vehicle division.
• $2.8 billion in restructuring costs. These are the costs associated with the dismissal of 15 thousand employees, including compensation and early retirement. This charge is the only one that actually represents a real outflow of money.

While these are huge losses, most of them relate to accounting adjustments and do not involve an actual cash outflow. But they reflect a huge structural problem at Intel.

What happened. Intel is losing ground in several areas:

1. AI. In the chip market, it lags behind NVIDIA, AMD or Qualcomm.
2. Production. Its third-party division suffered losses while trying to compete with TSMC, which has not stopped growing.
3. PC. Revenue from what remains its core division also fell. 7%.

So what now. CEO Pat Gelsinger has some chances to change that:

• Convert the third-party division into an independent subsidiary.
• Focus on developing the Intel 18A manufacturing process.
• Simplify your product catalog.
• Increase organizational effectiveness.

Between the lines. Despite the historic losses, investors welcomed the restructuring efforts and are confident that these measures will allow Intel to regain its position. Shares rose 15% after the results were announced.

The real battle for Intel’s future will begin in 2025 when it releases Panther Lake, its architecture based on the 18A process. Then we’ll have to see what AMD, Apple or Qualcomm announce.

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Featured Image | Intel, Hataka