Intel Corporation, the world’s largest semiconductor manufacturer, reported its first-quarter earnings on Wednesday, revealing a massive 133% annual reduction in earnings per share, with revenue dropping nearly 36% year-over-year to $11.7 billion. However, despite the disappointing results, the loss per share and sales were slightly better than Wall Street’s expectations, causing Intel’s stock to fluctuate in extended trading.
Second Quarter Predictions
For the second quarter, Intel predicts a loss of 4 cents per share on revenue of $12 billion. This forecast is less than analyst expectations for earnings of 1 cent per share on $11.75 billion in sales, according to Refinitiv.
The semiconductor giant has experienced five consecutive quarters of falling sales, making this its second consecutive quarter of losses. CEO Patrick Gelsinger, who entered his third year at the helm of the company, is under pressure to turn things around. He plans to open up Intel’s factories as foundries, or factories that can make chips for other companies, with the hope that by 2026, they can manufacture chips as advanced as those made by TSMC in Taiwan, and compete for custom work like Apple’s A-series chips in iPhones. Intel Corporation remains on track to hit that goal.
PC Chips Department Taking a Hit
Intel’s PC chips, which used to be the company’s strongest product line, were hit hard, with the Client Computing group reporting $5.8 billion in revenue, down 38% on an annual basis. Meanwhile, its server chip division, under the Data Center and AI segment, suffered an even worse decline, falling 39% to $3.7 billion. The only bright spot for Intel Corporation was Mobileye, a subsidiary that makes systems and software for self-driving cars, which reported a 16% sales growth to $458 million.
Intel Reports Worst-Ever Quarterly Results: Impact of PC and Data Center Sales Drop
A sign of Efficiency
Despite the disappointing results, Intel’s expanding gross margins were a big plus for investors. The company said gross margins would be about 37.5% on a non-GAAP basis in the current quarter, which beat FactSet estimates. Intel said this was a sign that the company was controlling costs and operating efficiently. It also 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.
A Long Road Ahead
It is clear that Intel Corporation has a long road ahead in regaining its position as a leader in the semiconductor industry. Still, Gelsinger remains optimistic and stated, “We still have more work to do as we reestablish process, product, and cost leadership, but we continue to provide proof points each quarter.” Investors will be keeping a close eye on Intel in the coming quarters to see if the company can turn things around.
