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
Earnings
Intel reported a second-quarter loss of $454 million, or 11 cents a share, versus net income of $5.06 billion, or $1.24 a share, in the year-ago period. After adjusting for acquisition-related expenses and other items, Intel reported earnings of 29 cents a share, compared with $1.36 a share from a year ago.
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
Intel Q2 22 Earnings:
- Adj EPS: $0.29 (est $0.69)
- Revenue: $15.32B (est $17.97B) from $19.63 billion in the year-ago quarter, for an eighth straight quarter of year-over-year declines.
- Excluding Intel’s divested memory business, the company reported revenue of $18.5 billion in the year-ago period.
- Gross margins dropped to 44.8% from 59.8% in the year-ago period.
- Second-quarter sales in the datacenter and AI category fell 16% to $4.6 billion, well below the Street’s estimate of $6.19 billion.
- Revenue from client computing, the traditional PC group, fell 25% to $7.7 billion, below Wall Street’s estimate of $8.89 billion.
“This quarter’s results were below the standards we have set for the company and our shareholders,” said Intel Chief Executive Pat Gelsinger in a statement. “We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues.”
Outlook
For the third quarter, Intel forecast earnings of 35 cents a share on revenue of about $15 billion to $16 billion and adjusted gross margins of 46.5%. Analysts surveyed by FactSet expect adjusted third-quarter earnings of 87 cents a share on revenue of $18.72 billion.
Intel cut its outlook for the year to adjusted earnings of $2.30 a share on revenue of about $65 billion to $68 billion with gross margins of 49%. Earlier in the year, Chief Financial Officer David Zinsner had said he was comfortable with a gross margin forecast between 51% and 53%, and last year Gelsinger had promised margins would remain “comfortably above 50%.”
For the year, Wall Street estimates earnings of $3.34 a share on revenue of $74.46 billion. Last quarter, Intel shared an optimistic outlook for the year of about $3.60 a share on revenue of about $76 billion with gross margins of 52%, which had placed an enormous pressure to deliver in the second half of the year.
Source: Reuters, TC
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