Due to the cooling demand for data center chips and the sharp decline in PC shipments, Intel’s second-quarter earnings report and this quarter’s financial forecast announced after the US stock market on Thursday (28th) both fell short of expectations. The company also revised down its annual revenue and earnings. Earnings Outlook. However, Chief Executive Pat Gelsinger expects earnings to bottom out this quarter as customers destock.
Intel (INTC-US) closed down 1.17% on Thursday to $39.71 per share. The performance was weaker than the financial forecast. It once dragged down the stock price after the market by more than 10%, and the decline slightly converged to 8.5% before the deadline. The stock has fallen about 25% so far this year.
FY 2022 Q3 Estimates (Non-GAAP) vs Refinitiv Analyst Consensus Estimates
- Revenue: $15-16 billion vs $18.62 billion
- Gross profit margin: 46.5%
- EPS: 35 cents vs 86 cents
Full-year guidance (Non-GAAP) vs Refinitiv consensus
- Revenue: $65-68 billion vs $73.44 billion
- Gross profit margin: 49%
- EPS: $2.30 vs $3.42
- Capital expenditures: $23 billion
Gissinger said that the rapid slowdown in economic activity was the main reason for the company’s failure to meet expectations, and part of it also reflected his own problems in product design and shipment delays, but he promised that new products developed after he took office will be on time. the arrival.
Kissinger also said that the current order level is lower than the end-market chip purchases, which means that orders will rebound as inventory destocks. “We haven’t seen this level of inventory adjustment in the past decade, and we’re confident the company’s earnings will bottom out this quarter,” he said.
Intel Chief Financial Officer David Zinsner agrees that the company is at the bottom, and is optimistic about the benefits of price increases and seasonal demand improvement in the fourth quarter, bringing gross margins back to around 51-53%.
Q2 (as of July 2) key earnings figures (Non-GAAP) vs Refinitiv consensus estimates
- Revenue: $15.3 billion (-22% y/y) vs $17.92 billion
- Gross profit margin: 44.8%, compared to 59.8% in the same period last year
- Net profit: $1.2 billion (79% decrease year over year)
- EPS: 29 cents (79% y/y) vs 70 cents
Revenue Breakdown by Business vs StreetAccount Consensus Estimates
- Client Computing Group (CCG): $7.7 billion (-25% y/y) vs $8.89 billion
- Data Center and Artificial Intelligence (DCAI): $4.6 billion (-16% y/y) vs $6.19 billion
- Network and Edge (NEX): $2.3 billion (11% y/y) vs $2.27 billion
- Accelerated Computing Systems and Graphics (AXG): $186 million (+5% y/y)
- Mobileye, an autonomous driving business: $460 million (+41% year over year)
- Foundry Services (IFS): $122 million (down 54% year over year)
Intel’s overall revenue fell for seven straight quarters. Among them, the revenue of the client computing business including PC chips was US$7.7 billion in Q2, a decrease of 25% year-on-year. Intel previously said weak PC demand in the consumer and education markets and higher unit costs weighed on segment operating profits.
The newly established data center and artificial intelligence business posted Q2 revenue of $4.6 billion, down 16% from the same period last year. The segment’s merchandise category includes server chips, accelerators, memory and FPGAs, and competitive pressure is one reason for the decline in revenue. Kissinger said the company expects the division to grow at a slower pace this year than the overall server market.
Kissinger also announced on a conference call that he plans to push for an initial public offering (IPO) of self-driving unit Mobileye later this year, depending on market conditions.
Sinther said that taking into account the economic conditions, Intel will slow down the pace of hiring, expected capital expenditures this fiscal year of 23 billion US dollars, lower than the previous forecast of 27 billion US dollars.