Semiconductor giant Intel stock plunged after another dismal earnings report and guidance cut. INTC reported adjusted second-quarter earnings of 29 cents a share, compared with $1.36 a share from a year ago. Intel is the 2nd heaviest weight in the SMH ETF and had been bid up prior to the report after the passing of the CHIPS and Science Act aimed at boosting US chip production. The offers more than $52 billion for US chipmakers as well as tax credits for domestic factories. INTC fell to $36.41 down 3.30 or 8.31% after the release.
The company’s CFO, David Zinsner, said that the macro environment is weaker than Intel anticipated coming into the quarter. Accordingly, he expects customers to reduce inventory levels, negatively impacting demand for INTC’s chips. Recall when INTC reported Q1 earnings on April 28, it issued downside Q2 EPS and revenue guidance of $0.70 and $18.0 billion, respectively. This update adds to that already doomy outlook. $INTC shares closed down $2.30 or 5.28% at 41.23 on the day.
Intel Second Quarter 2022 Earnings After Thursday Close
$0.29 Missed EPS $0.69 Forecast and $15.3B Missed Revenue $17.97 Billion Forecast
Intel Q3 22 Earnings:
Intel’s issues are compounded as it is the middle of progressing through a major transition as it expands its manufacturing capacity in the U.S. INTC’s margins are taking a significant hit.
Highlights
- Net income, at $1.02 billion, was down from $6.82 billion in the year-ago quarter.
- Earnings: 59 cents per share, adjusted, vs. 32 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $15.34 billion, vs. $15.25 billion as expected by analysts, according to Refinitiv.
- Client Computing Group $8.12 billion in revenue, down 17% but above the $7.58 billion consensus among analysts polled by StreetAccount.
- Datacenter and AI segment $4.21 billion in revenue, down 27% and lower than the StreetAccount consensus of $4.67 billion.
- Network and Edge segment revenue of $2.27 billion, which was up 14% and less than the $2.40 billion StreetAccount consensus.
- On Wednesday Intel-backed autonomous-driving technology company Mobileye IPO started trading on the Nasdaq. Intel bought it in 2017 and retains control of the company.
- During the quarter Intel said MediaTek would rely on Intel Foundry Services for chip manufacturing,
- INTC broke ground on a production facility in a planned investment in Ohio exceeding $20 billion.
Stock Market Reaction
A welcome bounce after a sea of red from, Meta and Facebook
- $INTC 27.50 ▲ 1.23 (4.68%) After hours
- After closing at 26.27 ▼-0.94 (-3.45%) today, ▼-21.62 (-45.15%) past year ▼-18.13 (-40.83%) past 5 years
Client Computing Group
Client Computing Group that includes PC chips generated $8.12 billion in revenue, down 17% but above the $7.58 billion consensus among analysts polled by StreetAccount.
Intel said demand for PCs softened in the quarter mainly in consumer and education markets, while device makers reduced their inventories.
Gartner said that in the third quarter PC shipments declined almost 20%, after two years of consumers buying computers to work, study and play games from home during the pandemic.
Datacenter and AI segment
Datacenter and AI segment, including server chips, memory and field-programmable gate arrays, posted $4.21 billion in revenue, down 27% and lower than the StreetAccount consensus of $4.67 billion.
“The data center TAM is holding up better, although enterprise in China continued to show signs of weakness, as do some, but not all, cloud customers,” Gelsinger said.
The Network and Edge segment
The Network and Edge segment features networking products had revenue of $2.27 billion, which was up 14% and less than the $2.40 billion StreetAccount consensus.
Outlook
“We are planning for the economic uncertainty to persist into 2023,” CEO Pat Gelsinger said on a conference call with analysts. A global recession is possible, said Intel’s finance chief, David Zinsner.
Management lowered the forecast for the full fiscal year. The company now sees $1.95 in adjusted earnings per share and $63 billion to $64 billion in revenue, compared with $2.30 in adjusted earnings per share and $65 billion and $68 billion in revenue three months ago. That implies a decline in revenue of almost 20%. Analysts polled by Refinitiv had expected $2.15 in adjusted earnings per share and $65.26 billion in revenue.
Intel said it’s aiming for $3 billion in reductions of cost of sales and operating expenses in 2023, and amount of annual savings will reach $8 billion to $10 billion by the end of 2025.
Source: Reuters, TC
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