Once upon a time Intel was a technology darling, that sadly was many moons ago as it got left behind with its rooted in the past attitude. Today it reported the fifth consecutive quarter of falling sales and the second consecutive quarter of losses. Intel reported first-quarter results on Thursday with a 133% annual reduction in earnings per share. This led to the biggest loss in the company’s history. Sadly, the terrible earnings were anticipated and even less than expected, explaining why the stock is holding up quite well after the report. Intel was trading higher at 31.26 ▲1.40 (4.69%) After Hours.
Intel investors are hoping for some relief that its business has at least stabilized. Intel’s earnings, margins, and cash flow continue to erode as the chip maker’s primary PC and server markets grapple with macroeconomic headwinds and an associated inventory supply imbalance.
Intel Q1 23 Earnings
Highlights
- Intel recorded a net loss of $2.8 billion, compared with a profit of $8.1 billion last year.
- Loss per share: Loss of $0.04 per share, adjusted, versus a loss of 15 cents per share expected
- Revenue: $11.7 billion, adjusted, versus $11.04 billion expected and from $18.4 billion
- It’s the fifth consecutive quarter of falling sales for the semiconductor giant and the second consecutive quarter of losses.
- Largest quarterly Intel loss of all time, in the fourth quarter of 2017 reported a loss of $687 million.
- Intel’s Client Computing group, which includes the chips that power the majority of desktop and laptop Windows PCs, reported $5.8 billion in revenue, down 38% on an annual basis.
- Global PC shipments dropped nearly 30% Q1, according to IDC
- Intel’s server chip division, under its Data Center and AI segment suffered an even worse decline, decreasing 39% to $3.7 billion.
- Network and Edge, posted $1.5 billion in sales, down 30% from the same time last year.
- Mobileye reported 16% sales growth to $458 million.
INTC: Stock Market Reaction
- $31.26 ▲ 1.40 (4.69%) After Hours
- $29.86 ▼ -15.36 (-33.97%) past year
- $29.86 ▼ -22.92 (-43.43%) past 5 years
- 52wk High $47.27
- 52wk Low $24.59
Outlook
Intel’s guidance for the second quarter of about $12 billion in revenue and a 4-cent loss per share came up short versus analyst expectations of $0.01 in earnings per share on $11.75 billion in sales.
- Sees Q2 Adj Loss/Shr 4C (est Loss/Shr 2C)
- Sees Q2 Adj Rev $11.5B To $12.5B (est $11.75B)
- Expecting Modest Second Half Recovery
Intel’s Cost Slashing and Money Raising Plans
Intel has been aggressive in fighting for profitability and raising cash. They span-off Mobileye, accelerated layoffs, and slashed their dividend as it moves ahead with its transformation of becoming a domestic chip producer.
Intel said that its recent push to cut costs, including through layoffs, was working, and that it expected to save about $3 billion in 2023 and as much as $10 billion per year by 2025.
Slashed Dividend
Intel has already slashed it’s dividend when issuing a very bleak outlook for 1Q23 (which was reaffirmed today) given huge dividend was unsustainable. INTC’s cash flow from operations has been basically cut in half and for FY22at $15.4 bln nearly $6.0 bln was paid out in the form of dividends. With FY22 net income of about $8.0 bln the dividend payout ratio penciled out to an unfeasible 75%.
Job Cuts
In Q4, the company implemented a significant workforce reduction plan and began rationalizing its investments around areas that it believes hold the highest long-term value.
Mobileye
One bright spot for intel was Mobileye, which went public last year but is still controlled by Intel. Mobileye reported 16% sales growth to $458 million.
INTC spun-off its Mobileye (MBLY) autonomous driving unit on October 26 last year via an IPO which valued the company at $16.7 bln. MBLY was expected to attract a $50+ bln valuation only a year before the IPO launched. MBLY now looks a bit hasty as shares have nearly doubled versus the $21/share IPO price.
US Chip Plans
Intel hopes that by 2026 it can manufacture chips to compete with TSMC in Taiwan, and compete for custom work like Apple’s A-series chips in iPhones. Intel said on Thursday it was still on track to hit that goal.
Intel in July announced plans for an initial investment of more than $20 billion to build two chip factories in Ohio. Over the next decade, INTC’s investments in these plants could exceed $100 billion. Meanwhile its a question of survival as margins continue to take massive hits. Gross margin in Q4 collapsed to 43.8% from 55.8% in the year-earlier quarter.