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Intel (INTC) earnings Q1 2022

Intel shares fell 4% in extended trading on Thursday after the chip maker issued a lower-than-expected forecast for its second-quarter financials.

This is how the company did:

  • Earnings: 87 cents per share, adjusted, against 81 cents as expected by analysts, according to Refinitiv.
  • Income: $ 18.35 billion against $ 18.31 billion as expected by analysts according to Refinitiv.

Intel’s revenue fell 7% year-over-year in the quarter ending April 2, according to a statement. Intel’s gross margin fell to 50.4% from 55.2%. The accounting quarter had 14 weeks.

“We expect the industry to continue to see challenges until at least 2024 in areas such as capacity and tool availability,” Intel CEO Pat Gelsinger told analysts at a conference call.

Intel’s Client Computing Group, which includes PC chips, generated $ 9.29 billion in revenue, a 13% drop and below the $ 9.42 billion consensus estimate among analysts surveyed by Refinitiv. Analyst firm Gartner had estimated that PC shipments fell 6.8% during the quarter, and on Tuesday Microsoft said it saw strength in the business PC market, boosting sales of Windows licenses from device manufacturers.

Sales of Intel chips for desktops and notebooks declined, with weaker demand among consumers and in education, and Apple switched to its own PC processors. It did not help that device manufacturers have lowered their inventories to match demand and adapt to other components.

The segment’s operating margin fell to 30% from 40%. Management said operating revenues were declining due to the shift to next-generation chip architectures and investments to be made on its roadmap.

Intel renewed its reporting structure during the quarter, unveiling a segment called Datacenter and AI, which includes chips, certain accelerators, memory and field-programmable gate arrays. Revenue from the segment increased 22% to $ 6.03 billion. The company cited strong demand from operators of large data centers and companies.

During the quarter, Intel said a server chip codenamed Granite Rapids would be released in 2024 instead of 2023. The company said it would buy the Tower Semiconductor foundry and announced plans for chip factories in Germany and Ohio. Former Micron CFO David Zinsner became Intel’s CFO, replacing George Davis, who held the post for three years.

In terms of guidance, Intel called for adjusted earnings per share. share in the second quarter of 70 cents and $ 18.0 billion in revenue. Analysts surveyed by Refinitiv had expected 83 cents in adjusted earnings per share of $ 18.38 billion in revenue.

For the full fiscal year, Intel raised its adjusted earnings guidance by 10 cents to $ 3.60 per share on $ 76 billion in revenue. Analysts surveyed by Refinitiv had been looking for adjusted earnings of $ 3.50 per share and $ 75.78 billion in revenue.

The inventory challenges were to continue in the second quarter, but decrease in the second half of the year, Zinsner said. Covid lockdowns in China are increasing supply fears, and inflation could reduce the PC market year-round, Zinsner said.

Intel’s goal is to bring its server chips codenamed Sapphire Rapids out “meaningfully faster” than the increased chips with the Ice Lake codename, which became available in 2019, Gelsinger said. Any hyperscale data center company has lined up for it, he said.

Despite the movement after working hours, Intel stock has fallen around 9% since the beginning of 2021, while the S&P 500 has fallen around 10% over the same period.

WATCH: Bernstein’s Stacy Rasgon says Intel is a five-year story

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