Intel CEO Pat Gelsinger pictured during the ‘Chips for health’ event at the Grischa Hotel at the World Economic Forum in Davos, Switzerland, on May 24, 2022.
Eric Lalmand | Belga Mag | AFP | Getty Images
Intel shares sank as much as 10% in extended trading on Thursday after the chipmaker reported second-quarter results and quarterly and full-year guidance that fell short of analysts’ expectations.
Here’s how the company did:
- Earnings: 29 cents per share, adjusted, vs. 70 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $15.32 billion, vs. $17.92 billion as expected by analysts, according to Refinitiv.
Intel’s revenue declined some 22% year over year in the quarter that ended July 2, according to a statement. The company ended the quarter with a $454 million net loss, compared with $5 billion in earnings in the year-ago quarter. Gross margin narrowed to 36.5% from 50.4% in the previous quarter.
“This quarter’s results were below the standards we have set for the company and our shareholders,” CEO Pat Gelsinger was quoted as saying in the statement. “We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues.”
With respect to guidance, Intel called for 35 cents in adjusted earnings per share on $15 billion to $16 billion in revenue. Analysts polled by Refinitiv had expected 86 cents in adjusted earnings per share on $18.62 billion in revenue.
Intel lowered its full-year expectations. It said it now sees full-year adjusted earnings of $2.30 per share and revenue of $65 billion to $68 billion. The guidance from three months ago was $3.60 in adjusted earnings per share on $76.0 billion in revenue. Analysts polled by Refinitiv had been looking for $3.42 per share in earnings and $74.34 billion in revenue.
Small and medium-sized businesses have slowed down their computer purchasing, but the enterprise has been holding up, David Zinsner, Intel’s finance chief, told CNBC in an interview. Still, the updated forecast factors in economic weakness that might result in organizations delaying PC refresh cycles.
“We do think we’re on the bottom,” Zinsner said, adding that price increases and a seasonal improvement in the fourth quarter should help Intel bring its gross margin back to around 51% to 53%.
During the second quarter, Intel’s Client Computing Group, which includes PC chips, generated $7.7 billion in revenue, down 25% and considerably less than the $8.89 billion consensus estimate among analysts surveyed by StreetAccount. Earlier this month technology industry researcher Gartner said PC shipments declined almost 13% during the quarter. In a presentation to investors, Intel flagged “softening” demand for PCs in the consumer and education markets and said higher unit costs reduced the segment’s operating income.
Intel’s recently established Datacenter and AI segment, including server chips, accelerators, memory and field-programmable gate arrays, contributed $4.6 billion in revenue, which was down 16%, trailing the StreetAccount consensus of $6.19 billion. Competitive pressure hurt the unit’s revenue, Intel said.
Intel’s new Network and Edge segment, which houses the company’s networking products, generated $2.3 billion in revenue, up 11% and barely higher than the $2.27 billion StreetAccount consensus.
During the quarter Intel launched Habani Gaudi2 artificial-intelligence training chips that compete with Nvidia’s A100 graphics cards. And Intel called on Congress to move forward with federal legislation to support U.S. semiconductor manufacturing, so that it could proceed with a plant in Ohio. Earlier on Tuesday the U.S. House passed the Chips and Science Act, sending the bill to President Joe Biden.
Excluding the after-hours move, Intel shares have fallen about 23% so far in 2022, while the S&P 500 index has declined less than 15% over the same period.
Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.
This story is developing. Please check back for updates.
Correction: An earlier version of this story misstated Intel’s net loss for the quarter. It was $454 million.
WATCH: Intel is going to have to spend this money and any help they get from the government helps, says Bernstein’s Rasgon