Intel today announced the company's third quarter financial results in fiscal year 2022. The company lowered its full year profit and revenue forecasts and warned of layoffs. However, the stronger than expected performance of its PC business drove the share price higher.

Intel shares rose more than 5% in after hours trading. So far this year, they have fallen about 47%, underperforming the S&P 500 Index and the Philadelphia SE Semiconductor Index.

Pat Gelsinger, CEO, said that the lowered outlook for the fourth quarter reflected the economic uncertainty that was expected to last until next year, and that the company was taking time to increase data center sales, which fell by 27% in the third quarter.

Intel also lowered its capital expenditure forecast for the current fiscal year to $25 billion from the previous $27 billion.

When asked about possible layoffs, Gelsinger told Reuters that "personnel optimization" would be part of the cost reduction plan. Intel said it would drive costs down by $3 billion in 2023.

Gelsinger told Reuters and added that the adjustment of flexible labor can be "very direct": "In terms of human cost, what we can do is only a small part of our overall cost structure. Therefore, improving the efficiency of the factory network is more important for our economy than human cost." He said that the adjustment would begin in the fourth quarter, but did not specify how many employees would be affected.

Just before Gelsinger took the helm, Intel had 110600 employees by the end of 2020. By the beginning of October this year, the number had surged to 131500.

The macroeconomic downturn has confused the prospects of the PC and data center markets, which are both big markets of Intel.

Kingai Chan, an analyst at Summit Insights Group, said that Intel's "PC client business is a ray of hope, because sales have continued to grow, which brings some hope to investors, that is, share losses have eased significantly".

Client computing revenue, which accounted for Intel PC sales, increased from $7.7 billion in the second quarter to $8.1 billion in the third quarter.

"We believe that the loss of its data center share should also moderate next year," Chan said.

On Thursday, Amazon reported lower revenue than analysts had expected from its cloud business AWS, which grew 28% to $20.5 billion. AWS and other cloud service providers are key customers of chip manufacturers, including Intel, and key to their revenue growth. Intel has been losing its market share in the data center market. Gelsinger said that its market share in the third quarter fell again: "We did not launch new products like Sapphire Rapids, but because these products are now fully produced, our future positioning is better than ours". He said that Intel gained market share in the personal computer field in the third quarter.

The surge in inflation has hit demand for computers and other small tools, forcing electronics companies to cancel orders for components such as chips because they have difficulty clearing their inventories.

According to Counterpoint Research, PC shipments fell by 15.5% in the third quarter. Intel said that it is expected that the PC market will decline at a medium high level in 2022.

The company now expects annual revenue of about $63 billion to $64 billion in 2022, compared with its initial forecast of about $76 billion.