Intel reported net income of 29 cents a share, down 79 per cent from a year earlier. Non-GAAP revenue for the quarter was $15.3 billion, down 17 per cent from a year ago.
Analysts expected Intel to report second quarter earnings per share of $2.19 billion on revenues of $18.07 billion.
Intel revenues were $15.3 billion, down 22 per cent and things are not looking good for Chipzilla with the outfit revising its full-year guidance downward to $65 billion to $68 billion in revenues.
Intel CEO [kicking] Pat Gelsinger said that the quarter’s results were below Intel's standards.
“We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues. We are being responsive to changing business conditions, working closely with our customers while remaining laser-focused on our strategy and long-term opportunities. We are embracing this challenging environment to accelerate our transformation.”
Gelsinger returned to Intel last year as CEO to get his shot at turning Intel. He arrived after several hard years of manufacturing delays. Intel also faces heavy competition from AMD.
Intel CFO David Zinsner said: "“We are taking necessary actions to manage through the current environment, including accelerating the deployment of our smart capital strategy, while reiterating our prior full-year adjusted free cash flow guidance and returning gross margins to our target range by the fourth quarter. We remain fully committed to our business strategy, the long-term financial model communicated at our investor meeting and a strong and growing dividend.”
The outfit has announced it is slowing hiring, but it is now having to deal with companies and consumers who are flat broke becasue of high interest rates, and increased energy bills. Also on Intel's plate are supply chain issues, the war in Ukraine and high inflation.
Gelsinger said the supply chain challenges have limited the ability to meet demand in some areas and hurt demand in others.
Intel recently said it would spend $20 billion on new manufacturing in Arizona. It also completed a $3 billion expansion in Oregon and it has pulled in its schedule for its manufacturing roadmap through the next couple of years. On a big positive note, Congress has passed the Chips and Science Act, which will provide $52 billion in subsidies for domestic chip manufacturing. The measure is awaiting President Joe Biden’s signature.
“We are thrilled to see the Chips Act passed by Congress this week and expect it to be on the president’s desk shortly,” Gelsinger said.
While Intel invests in its core chip business, the company has exited six businesses that have generated $1.5 billion in capital for Intel, Gelsinger said.
The Client Computing Group reported second quater revenues of $7.7 billion, down 25 per cent from a year ago. The consumer education and small and medium business sectors were weak. Operating profit was $1.1 billion, down 73 per cent.
The Datacenter and AI Group reported Q2 revenues of $4.6 billion, down 16 per cent from a year earlier. OEM inventory reductions, product mix, and other reasons accounted for the drop. The network and edge group saw Q2 revenue of $2.3 billion, up 11 per cent from a year earlier. That was due to strong networking Ethernet and 5G product sales.
Gelsinger said the company expects the PC total available market to decline 10 per cent in 2022. Remote school and work will produce some demand, and 600 million PCs are four years and older. Datacenter and AI growth is expected to be mid-teens per year in the years ahead. But a reduction in demand will cause slower growth in the second half.
Intel Foundry services saw revenue of $122 million, down 54 per cent from a year earlier. It had a revenue decrease in automotive due to product shortages.
Intel noted its accelerated computing systems and graphics group had a Q2 revenues of $186 million, up five per cent. Gelsinger said Intel is expanding its relationships with Meta and AWS. Intel is exiting the Optane and drone business.
Gelsinger said Intel will ramp for volume shipments for Saphhire Rapids in the second half of the year. Gelsinger said the company’s execution must improve and the culture of execution must be rebuilt. He did not say who he wanted to execute.
Intel announced guidance for the third quarter and full-year. Intel expects the macroeconomic picture to decline for the rest of the year and a recessionary environment to be in effect.
Intel said non-GAAP revenues for Q3 will be an estimated $15 billion to $16 billion, with gross profit margin coming in at 46.5 per cent and earnings per share at an estimated 35 cents.
For the full year, Intel said non-GAAP revenues will be $65 billion to $68 billion, with gross margins at 49 per cent. Zinsner said the second and third quarters will be the worst for Intel. Gelsinger said that Intel was expecting 350 million PCs to ship in 2022, and now that is more like 310 million to 325 million.
“We were well into the quarter and we saw the market characteristics change quite suddenly,” Gelsinger said.