Updated at 9:34am EST
Intel (INTC) – Get a free report Shares fell on Friday after the chipmaker posted weaker-than-expected fourth-quarter earnings and said continued weakness in PC demand would pressure margins and cut profits in the near term in coming months.
Intel’s adjusted bottom line for the December quarter was pegged at 10 cents per share, while the Street had forecast a profit of 20 cents per share. Revenue was also slight at $14 billion, compared with a Street forecast of $14.5 billion, while gross margins fell to 43.8%.
Client computing revenue fell 36% from last year to $6.6 billion, Intel said, with little overall support from its data center and AI division, where sales fell 33% to $4.3 billion. Network and Edge Group sales fell 1% to $2.1 billion.
Intel said it sees a further slowdown in revenue, to between $10.5 and $11.5 billion during the current quarter.
Gross margins for the three months ending in March are now expected to shrink to around 34.1%, almost half of the chipmaker’s long-term target of around 60%.
With weak PC demand expected to last well into the first half of the year, and data center customers to backtrack on their spending plans amid broader macroeconomic uncertainty, Intel expects a 15-cent loss. per share in the March quarter.
“We stumbled…we lost share…we lost momentum,” CEO Pat Gelsinger told investors in a conference call Thursday night. “We think that stabilizes this, we are (and) are going to build a roadmap that allows us to regain long-term leadership in this critical market.”
“We are confident in the strategic perspective we have for our business, even though the macro is difficult,” he added. “It was tough in the fourth quarter. We expect it to continue to be tough as we move into the first half of the year, but we’re focused on controlling the things we can and every aspect of our execution, cost management and transformation is in our hands and we’re well along in executing against those paths.”
Intel shares were down 10.55% in early trading on Friday to change hands at $26.92 apiece. Chip rivals were also under pressure, with Advanced Micro Devices (AMD) – Get a free report shares were down 1.3% at $74.15 apiece, while Nvidia (NVDA) – Get a free report it fell 0.7% to $196.65 each.
“While no full-year guidance was provided, Intel sees the first-half correction to be followed by a second-half recovery,” said John Vinh, an analyst at KeyBanc Capital Markets, who lowered his earnings estimates to short term but maintained its ‘sector weight’. Intel stock rating.
“We expect 2023 to be another challenging year with limited catalysts,” he added.
Intel’s delayed next-generation ‘Sapphire Rapids’ chip is expected to ramp up production later this year, but will likely still find it hard to challenge Advanced Micro Devices. (AMD) – Get a free report new ‘Genoa’ data center chip which CEO Lisa Su says will result in “lower capex, lower opex and lower total cost of ownership” for enterprises and cloud data centers.
“Intel had high hopes that Sapphire Rapids would allow them to fight AMD and regain some footing within data centers,” said Lucas Keh, a Third Bridge semiconductor analyst.
“However, our experts say it has been disappointing so far due to continued inconsistency in delivery from Intel,” he added. “They had to remove features to finally deliver Sapphire Rapids in a reasonable amount of time to the public amid the delays.”
