Published in PC Hardware

Intel seriously tanks

by on27 January 2023

Worst results in its history 

Intel has seen the worst results in its history and lost money as its margins collapsed.

Intel lost $700 million as its margins collapsed to a multi-year minimum. While the company was profitable in 2022, it said its earnings would drop further this quarter as its customers will aggressively cut their inventory. Intel expects its sales to decrease even further next quarter.

Intel's Q4 FY2022 revenue dropped to $14 billion, which is 32 per cent lower than in the same quarter a year ago. The company's gross margin decreased to 39.2 per cent from 53.6 per cent in the fourth quarter of fiscal 2021.

The 39.2 per cent gross margin is the lowest gross margin that Intel posted in years, if not decades. The company lost $664 million in the quarter, which is almost the company's largest quarterly loss ever. The company lost $687 back in Q4 FY2017 because of a declining PC market, so this time the hit was a bit lower.

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Intel's 2022 revenue totaled 63.1 billion, down 20 per cent year on year and gross margin decreased to 42.6 per cent and net income collapsed to $8 billion, or down by 60% YoY.
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Chipzilla said that it was important not to worry so much about the losses but that it was working to achieve its strategic goals during tricky times. The company also says it had to adjust its operating costs, review its roadmap, and even reduce headcount.

Intel CEO Pat [Kicking] Gelsinger dusted off the old "headwinds" metaphore which we are seeing from a lot of IT executives this quarter. Headwinds is a good word to use, it implies you could have done nothing to avoid the problem because it is like stopping the weather. It also means that it is just a short term problem which you will defeat by turning right (normally by firing staff). The use of the word "navigate" is another one, which implies that everything is under someone's control, even if they are having trouble with headwinds.

"Despite the economic and market headwinds, we continued to make good progress on our strategic transformation in Q4, including advancing our product roadmap and improving our operational structure and processes to drive efficiencies while delivering at the low-end of our guided range," said Gelsinger said

"In 2023, we will continue to navigate the short-term challenges while striving to meet our long-term commitments, including delivering leadership products anchored on open and secure platforms, powered by at-scale manufacturing and supercharged by our incredible team."

Well, what is left of them anyway. 

Intel's Client Computing Group only earned $6.6 billion, down from $10.3 billion in the same period a year before. Nevertheless, with an operating margin of 11 per cent the unit brought Intel some $700 million in non-GAAP profit.

Intel blames lower revenue on weak PC demand in consumer and education and PC OEM inventory reductions. The company did not mention whether it had to sell certain client PC products at huge discounts in the quarter, though given that sales of client CPUs and chipsets are down 36 per cent year-over-year, it looks like the decline had something to do with both average selling prices and volumes. Also, Intel noted that products made on its Intel 7 fabrication process (aka 10nm Enhanced SuperFin) are relatively costly to produce, affecting its profitability.

The Datacenter and AI group, its revenue dropped to $4.3 billion from $6.4 billion a year before, whereas its profitability fell to $0.4 billion from $2.4 billion in the fourth quarter of the previous year.

Intel says that the earnings and profitability of its DCAI business contracted because of soft demand for servers and competitive pressure from AMD.

Even though Intel's CCG and DCAI groups were  profitable, Intel's Accelerated Computing Systems and Graphics Group (AXG) lost $441 million amid $245 million in revenue, up a per cent year-over-year. Last year Intel finally launched its discrete Arc graphics processors for desktops and laptops, which apparently did not help the group's earnings much. So even though it's good to see that AXG reduced its losses, it is still unprofitable.

Chipzilla's Network and Edge Group (NEX) maintained its $2.1 billion revenue (flat YoY), but its profitability shrunk from $352 million in Q4 FY2021 to $58 million in Q4 FY2022.

Intel's MobileEye is another business demonstrating steady YoY growth despite economic turmoil. It booked $565 million in revenue due to the EyeQ and SuperVision ramp, up 59 per cent from the same period a year before. Furthermore, it also generated $210 million in net profits, up from $123 million a year before.


Last modified on 27 January 2023
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