Chip-maker Intel suffered a disastrous end to last week’s trading with its stock price sinking nearly 9% following a dismal earnings report. The report meant that Intel had to drastically alter its full year guidance to take account of what could be a difficult few months ahead.
The trigger that caused the meltdown was the revelation that Intel’s second-quarter results were nowhere near analysts’ expectations. Overall revenues for the quarter were just $15.32 billion against the $17.92 billion that was expected. This is down a staggering 22% on the same quarter in the previous year and is the brand’s biggest shortfall in over 20 years.
While Intel earned $5 billion in the same period last year, it actually ended up with a $454 million loss. Similarly, the earnings per share figure sat at just 29 cents, a mere shadow of the 70 cents per share that was hoped for.
Such sorry figures have meant that Intel had to alter its yearly guidance. Rather than the expected $70 billion in revenue that was predicted just three months ago, the tech brand adjusted its forecast to bring in revenues of $68 billion at most.
It comes at a pivotal time for Intel as the company has just launched its Habana Gaudi2 AI training chips that are going head-to-head with Nvidia’s graphics cards in this fledgling market. In addition to this, Intel has asked Congress to approve plans for its semiconductor factory in Ohio and it’s expected to release its Meteor Lake PC chips at some point in 2023 Plus with the IPO of its Mobileye autonomous driving unit due this year, such a poor earnings report couldn’t be worse timed.
Reasons for Intel’s misery
Many tech companies in the US are having trouble dealing with fast decline in economic activity in the nation at the moment. This has meant that many regular businesses simply aren’t purchasing the same quantities of computer equipment as had been predicted. With the cloud of inflation causing further economic weakness, the postponement of computer refreshing recycles has clearly hit Intel hard.
In addition to this, the specter of Covid is still causing problems regarding things like supply shortages that delayed its products actually getting on the shelves. But Intel execs admitted that they should take some of the blame. In particular, the brand felt that it had performed poorly in areas like product design, as well as with the rollout of its Accelerated Computing Systems and Graphic Group.
However, it hasn’t all been doom and gloom at Intel. The company’s CFO, David Zinser, stated that the brand was ‘on the bottom’ of the cycle, and that price rises and a bumper fourth quarter should push its gross margin up to around 53%. But with Intel seeing its stock price falling by 23% in 2022, compared to 15% for the S&P 500 index, there is no denying that this is a company experiencing some major difficulties.
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