Intel misses Q2 targets with 17% revenue decline to $15.3 billion

Intel reported second-quarter earnings and profits were below expectations as the chip giant addressed weakness in the PC market.

On a non-GAAP basis, in Santa Clara, California Intel reported net earnings of 29 cents per share, down 79% from a year earlier. Non-GAAP revenue for the quarter was $15.3 billion, down 17% from a year ago.

Analysts expected Intel to report second-quarter earnings per share of $2.19 billion on revenue of $18.07 billion. Shares of Intel in after-hours trading are at 6.75% to $37.14 per share.

On a GAAP basis, Intel lost 11 cents a share and revenue was $15.3 billion, down 22%. Intel revises its full-year guidance down to $65 billion to $68 billion in revenue.

“This quarter’s results were below the standards we have set for the company and our shareholders,” Intel CEO Pat Gelsinger said in a statement. “We must and will do better. The sudden and rapid decline in economic activity has been the main driver, but the deficit also reflects our own implementation difficulties. We respond to changing business conditions, working closely with our customers, while continuing to focus on our strategy and long-term opportunities. We embrace this challenging environment to accelerate our transformation.”

gel singer returned to Intel last year as CEO to get his chance to change Intel. It arrived after several tough years of production delays. Intel also faces stiff competition from Advanced Micro Devices (AMD), which has designed more innovative chips than Intel and gained market share for three years in a row.

“We are taking the necessary steps to manage the current environment, including accelerating the implementation of our smart capital strategy, as we reiterate our previous adjusted free cash flow guidance for the full year and return gross margins to our target range by the fourth quarter. ,” said David Zinsner, Intel CFO, in a statement. “We remain fully committed to our corporate strategy, the long-term financial model communicated at our investor meeting and a strong and growing dividend.”

Now the company faces consumers and businesses curbing PC purchases due to high interest rates, a slumping global economy and high inflation. In an analyst call, Gelsinger said supply chain challenges have limited its ability to meet demand in some areas and hurt demand in others.

Intel recently said it would release $20 Billion in New Production in Arizona. It also completed a $3 billion expansion in Oregon and has landed its production roadmap schedule for the next few years. One big positive is that Congress passed the Chips and Science Act, which will provide $52 billion in subsidies for domestic chip production. The measure awaits President Joe Biden’s signature.

“We are excited to see the Chips Act passed by Congress this week and expect it to be on the President’s desk soon,” Gelsinger said.

While Intel is investing in its core chip business, the company has exited six companies that have generated $1.5 billion in capital for Intel, Gelsinger said.

Intel said its client computing group as well as its data center and AI group were impacted by adverse market conditions. But the network and edge group and Mobileye had record quarterly sales.

Segment Reports

The Client Computing Group reported second-quarter revenue of $7.7 billion, down 25% from a year ago. The Datacenter and AI Group reported second-quarter revenue of $4.6 billion, down 16% from a year earlier. The network and edge group had second-quarter revenue of $2.3 billion, up 11% from a year earlier.

Mobileye had revenue of $460 million in the second quarter, up 41% from a year earlier. Intel Foundry Services had revenue of $122 million, down 54% from a year earlier.

Intel noted that its accelerated computer systems and graphics group had second-quarter revenue of $186 million, up 5%.

Business Outlook

Intel has released its third quarter and full year outlook.

Intel said non-GAAP revenue for the second quarter will be an estimated $15 billion to $16 billion, with a gross profit margin of 46.5% and earnings per share of an estimated 35 cents.

For the full year, Intel said non-GAAP revenue will be $65 billion to $68 billion, with gross margins of 49%.