Intel Reduces Annual Sales And Profit Forecasts After Missing Estimates in Q2
Intel Corp slashed its annual sales and profit forecasts on Thursday after missing estimates for second-quarter results as demand for its chips used in personal computers cools, sending shares down 10 per cent.
The company also forecast current-quarter results well below expectations, blaming the "sudden and rapid decline" in economic activity and execution issues.
Runaway inflation and the reopening of offices and schools have led people to spend less on PCs than they did during lockdowns, when many bought computers for work and school as they stayed home during the pandemic.
Chipmakers are also under pressure from a spate of COVID curbs in key PC market China and the Ukraine war that have worsened supply-chain snarls and dragged demand further. Global shipments of PCs are expected to drop 9.5 per cent this year, according to IT research firm Gartner.
"The economic shift was harsher and drove not only consumption changes in the marketplace, but also dramatic moves in the inventory position of key customers", Intel Chief Executive Pat Gelsinger told Reuters.
"Those effects caused a very sharp shift in the business, and we didn't execute particularly well."
Intel now expects fiscal 2022 revenue between USD 65 billion and USD 68 billion, compared with its earlier forecast of USD 76 billion. It also forecast adjusted profit of USD 2.30 per share, down from a prior outlook of USD 3.60 per share.
Still, Intel will not delay its USD 20 billion investment for a new mega chip factory in Ohio because of this tougher period, Gelsinger told Reuters. "You just don't build factories like this based on a couple of quarter cycles," said Gelsinger. "The semiconductor industry is doubling over the decade and I need capacity to grow into that opportunity."
While Intel took a major hit with the latest downturn, its competitors fared much better. Taiwan Semiconductor Manufacturing Co Ltd and Samsung Electronics Co Ltd, which, while warning about dampening PC and smartphone demand, delivered stronger sales growth in the by-gone quarter.
TSMC projected current quarter sales if achieved could be its highest in the 10 quarters, and raised its full year sales forecast.
Intel said sales from Datacenter and AI Group (DCAI) fell 16 per cent to USD 4.6 billion, coming in lower than analysts' target of USD 6.46 billion, despite strong growth analysts expect for the overall datacenter market.
"Intel is very dependent on the PC industry, as well as data centers, and OEMs have slowed orders for 2H22," said analyst Ryan Reith of market intelligence firm IDC. "Peers Samsung and TSMC have much broader exposure into mobile, auto, etc..."
Intel, which draws about half of its revenue from selling the chips that power desktops and laptops, also forecast current quarter revenue in the range USD 15 billion to USD 16 billion, also lower than an average of estimates of USD 18.62 billion, according to Refinitiv.
For the reported quarter, sales at Intel's Client Computing Group (CCG), which supplies PC makers and is the largest contributor to the company's revenue, fell 25 per cent to USD 7.7 billion in the reporting quarter. According to IT research firm Gartner, global shipments of PCs are expected to drop 9.5 per cent this year. read more
Intel's revenue dropped 22 per cent to USD 15.3 billion - its seventh straight quarter of decline and were below expectations of USD 17.92 billion.
On an adjusted basis, the company earned 29 cents per share, missing expectation of 70 cents.
(Reuters)
