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 it:
Earnings: 29 cents per share, adjusted, versus 70 cents per share as expected by analysts, according to Refinitiv.Income: $15.32 billion, versus $17.92 billion as analysts expected, according to Refinitiv.
Intel’s revenue fell 22% year over year in the quarter ended July 2, according to a report statement. Revenue missed consensus by 14%, the company’s biggest disappointment since 1999, according to data from Refinitiv. It ended the quarter with a net loss of $454 million, compared to net income of $5 billion in the year-ago quarter. Gross margin decreased to 36.5% from 50.4% in the previous quarter.
“The sudden and rapid decline in economic activity was the main driver of the shortfall, but the second quarter also reflected our own execution issues in areas such as product design and the AXG ramp. [Accelerated Computing Systems and Graphics Group] offers,” CEO Pat Gelsinger said on a conference call with analysts. He said Intel continues to deal with a Covid-related supply shortage that has delayed product availability.
As for guidance, Intel called for 35 cents in adjusted earnings per share on revenue of $15 billion to $16 billion. Analysts polled by Refinitiv had expected 86 cents in adjusted earnings per share on revenue of $18.62 billion.
Intel lowered its full-year expectations. He said he now sees full-year adjusted earnings of $2.30 per share and revenue of $65 billion to $68 billion. Guidance three months ago was $3.60 in adjusted earnings per share on $76 billion in revenue. Analysts polled by Refinitiv had been looking for $3.42 per share in earnings and $74.34 million in revenue.
Small and medium-sized businesses have slowed their computer purchases, but the company has held on, David Zinsner, Intel’s chief financial officer, told CNBC in an interview. Even so, the updated forecast influences the economic weakness that could cause organizations to put computer upgrade cycles on hold.
“We think we’re at the bottom,” Zinsner said, adding that price increases and a seasonal improvement in the fourth quarter should help Intel return its gross margin to around 51% to 53%.
In the second quarter, Intel’s Client Computing Group, which includes PC chips, generated revenue of $7.7 billion, 25% below the consensus estimate of $8.89 billion among analysts surveyed by StreetAccount. Earlier this month, technology industry researcher Gartner said PC shipments fell nearly 13% in the quarter. In a presentation To investors, Intel pointed to “softening” demand for PCs in the consumer and education markets and said higher unit costs reduced the segment’s operating income.
Intel’s newly established Datacenter and AI segment, which includes server chips, accelerators, memory and field-programmable gate arrays, contributed $4.6 billion in revenue, down 16%, behind the StreetAccount consensus of 6.19 billion dollars. Competitive pressure hurt the unit’s revenue, Intel said.
Intel’s new Network and Edge segment, which houses the company’s networking products, generated revenue of $2.3 billion, up 11% and barely beating the StreetAccount consensus of $2.27 billion.
During the quarter Intel launched Habana Gaudi2 AI training chips that compete with Nvidia’s A100 graphics cards. And Intel asked Congress to move forward with federal legislation to support U.S. semiconductor manufacturing so it could continue with a plant in Ohio. Earlier Tuesday, the US House passed the Science and Tokens Act, sending the bill to President Joe Biden.
In the interview, Zinsner reiterated Intel’s previous statement that the company will release PC chips codenamed Meteor Lake in 2023. digits reported that shipments would begin in late 2023, but Zinsner declined to be specific about timing. “I would tell you that we’re hoping to feed Meteor Lake, you know, relatively soon, so you know, we’re making really good progress, honestly.”
Intel plans an initial public offering of its Mobileye self-driving unit later this year, depending on the state of the markets, Gelsinger said at the Intel conference. On the call, Zinsner said Intel would slow its hiring due to economic conditions, with $23 billion in capital spending planned for 2022, down from a previous forecast of $27 billion.
Excluding the after-hours move, Intel shares are down about 23% in 2022, while the S&P 500 is down less than 15% over the same period.
This story is developing. Check back for updates.
Correction: An earlier version of this story misstated Intel’s net loss for the quarter. It was $454 million.
I WILL SEE: Intel will have to spend that money, and any help they get from the government will help, Bernstein’s Rasgon says.