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Intel (INTC) Q2 2022 Earnings

Intel shares fell 10% in extended trading Thursday after the chipmaker reported second-quarter results and quarterly and full-year guidance that missed analysts’ expectations.

Here’s how the company did it:

  • income: 29 cents per share, adjusted, versus 70 cents per share, as analysts expected, according to Refinitiv.
  • income: $15.32 billion, versus the $17.92 billion expected by analysts, according to Refinitiv.

Intel’s profit fell about 22% year over year in the quarter ended July 2, according to the statement. Revenue missed consensus by 14%, the company’s biggest disappointment since 1999, according to Refinitiv data. It ended the quarter with a net loss of $454 million, compared with a net profit of $5 billion in the year-ago quarter. Gross margin fell to 36.5% from 50.4% in the previous quarter.

“The sudden and rapid drop in economic activity was the biggest driver of the shortfall, but the second quarter also reflected our own execution challenges in areas such as product design and AXG growth. [Accelerated Computing Systems and Graphics Group] offers,” CEO Pat Gelsinger said on a conference call with analysts. He said Intel continues to struggle with supply shortages related to Covid, which have delayed product arrivals.

As for guidance, Intel is calling 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 guidance. It said it now expects 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 revenue of $76.0 billion. Analysts polled by Refinitiv had expected $3.42 in earnings per share and $74.34 billion in revenue.

Small and medium-sized businesses have slowed computer purchases, but businesses are holding up, David Zinsner, Intel’s chief financial officer, told CNBC. However, the updated forecast factors in economic weakness, which could lead to organizations delaying PC upgrade cycles.

“We really think we’ve bottomed out,” Zinsner said, adding that higher prices and a seasonal improvement in the fourth quarter should help Intel return its gross margin to around 51% to 53%.

Intel’s Client Computing Group, which includes PC chips, had $7.7 billion in revenue in the second quarter, 25% below the $8.89 billion consensus estimate of analysts polled by StreetAccount. Earlier this month, technology industry researcher Gartner said PC shipments fell nearly 13% in the quarter. In a presentation to investors, Intel noted “softening” demand for PCs in the consumer and education markets and said higher unit costs were weighing on the segment’s operating profit.

Intel’s newly formed data center and artificial intelligence segment, including server chips, accelerators, memory and programmable gate arrays, posted revenue of $4.6 billion, down 16%, missing the StreetAccount consensus of $6.19 billion. Competitive pressure hurt the division’s revenue, Intel said.

Intel’s new Network and Edge segment, which houses the company’s networking products, posted revenue of $2.3 billion, up 11% and narrowly beating the StreetAccount consensus of $2.27 billion.

During the quarter, Intel released the Habana Gaudi2 AI training chips that compete with Nvidia’s A100 graphics cards. And Intel urged Congress to move forward with federal legislation to support U.S. semiconductor manufacturing so it can build a plant in Ohio. Earlier on Tuesday, the US House of Representatives passed the Chips and Science Act, sending the bill to President Joe Biden.

“This is historic legislation,” Gelsinger said. Zinsner said on a conference call that Intel expects to receive funding under the legislation in 2023.

In an interview, Zinsner reiterated Intel’s earlier statement that the company would launch PC chips codenamed Meteor Lake in 2023. Digitimes reported that deliveries would begin in late 2023, but Zinsner declined to specify a timeline.

“I would tell you that we expect the power to be back on at Meteor Lake, you know, relatively soon, so you know, we’re making pretty good progress on that, to be honest.”

Intel plans an initial public offering of its Mobileye autonomous driving unit later this year, depending on market conditions, Gelsinger said during an Intel conference call. On the call, Zinsner said Intel will slow hiring due to economic conditions, with expected capital spending in 2022 of $23 billion, down from a previous forecast of $27 billion.

Excluding after-hours, 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 evolving. Check for updates.

Correction: An earlier version of this story misstated Intel’s net loss for the quarter. It was 454 million dollars.

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Intel (INTC) Q2 2022 Earnings

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