After months of being punished by skeptical investors, Intel’s stock rose in after-hours trading after the company reported better than expected profits on Thursday. But that was against a grim backdrop, as the chipmaker lowered its expectations for full-year results during hard economic conditions.

Intel reported net income of $1 billion, or 25 cents per share, for the third quarter, an 85% decrease from the previous year. Adjusting for items like stock compensation and restructuring chargers, its 59 cents per share of profit well exceeded estimates of 32 cents from analysts surveyed by Yahoo. Its $15.3 billion in revenue was close to the $15.2 billion expected.

Chief Executive Pat Gelsinger pointed to “worsening economic conditions” but said the company is cutting costs as a result, saving $3 billion in 2023 and $8 billion to $10 billion a year by 2025. That will include layoffs, he said during a conference call about the financial results.

Stock rose 6% to $27.85 in after-hours trading.

Intel lowered its full-year revenue estimate to $63 billion to $64 billion. That’s a drop of $2 billion to $4 billion from three months ago, when Intel first reported serious sales trouble in a dismal June quarter.

Intel is in the midst of a massive transformation under Gelsinger, who hopes to restore the company’s status as a leading chipmaker. To do so, Intel is spending big on new chip plants, trying to catch up to the manufacturing technology already offered by Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung, and compete directly against those two Asian giants with a new foundry business that builds processors for customers like Qualcomm.

If it succeeds, Intel stands to reinvigorate the US chipmaking industry and breathe new life into PC hardware that’s languished for years. Apple dumped Intel for its own M1 and M2 processors, built by TSMC and offering a compelling balance of performance and battery life.

Gelsinger said Thursday that Intel has stabilized market share losses in PCs. But it will be a long time before its second major division, server processors sold to companies like Dell and Google, has more competitive products to challenge surging AMD.

Before Gelsinger’s return to Intel in 2021, some observers expected Intel to follow in the footsteps of IBM and AMD, spinning off its chipmaking business and relying on other foundries to make its processors. But Gelsinger wants to maintain the company’s chipmaking operations, with new technology and higher manufacturing volume through the foundry business.

“There are three kinds of semiconductor companies: You’re either big, very niche or dead,” Gelsinger said earlier this week. He’s aiming for big, but the years-long, ambitious effort hasn’t sat well with investors.

Intel suffered major declines in its two biggest chip groups, which make processors for the PCs we purchase and the servers that power the data centers of companies like Meta and Google. The PC chip group’s revenue dropped 17% to $8.1 billion, while the data center group’s dropped 27% to $4.2 billion.

Progress with Meteor Lake, new server chips

Gelsigner tried to paint a rosy picture about products to come.

On the PC side, that includes Meteor Lake, a PC chip scheduled for 2023 release that incorporates a novel 3D stacking technique. Today’s Alder Lake laptop chips and Raptor Lake desktop PC chips are turning in “stunning numbers,” Gelsinger said.

And for its Xeon line of server processors, Intel has been hampered by delays to its current Sapphire Rapids, but things are going well for its 2023 and 2024 successors, called Emerald Rapids and Granite Rapids, respectively. Gelsinger also touted progress with a low-power sibling called Sierra Forest due in 2024.

“We had a particularly good quarter on the execution front,” Gelsinger said, naming Sapphire Rapids, Granite Rapids, Emerald Rapids and Sierra Forest. “The next three generation products are all making very good milestones, and I really feel like the worst of our execution is behind us.”