June 2, 2023

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Intel shares dip as chip maker doubles on expectations despite headwinds

Intel shares dip as chip maker doubles on expectations despite headwinds

Shares of Intel Corp fell in the extended session on Thursday after the chip maker stuck to its full-year forecast amid expected weakness this quarter, and forecast an increase in sales from its core business in the second half of the year.

intel intek,
+ 3.58%
Shares were down 4% after hours, after rising 3.6% in the regular session to close at $46.84, and by the end of the analyst conference call they were down about 4%.

For the second quarter, Intel expected earnings of about 70 cents per share on revenue of about $18 billion and adjusted gross margins of 51%. However, analysts polled by FactSet had forecast second-quarter adjusted earnings of 80 cents per share on revenue of $18.34 billion.

However, Intel reaffirmed its outlook for the year, with the company beating earnings per share expectations in the first quarter and barely beating revenue expectations, leaving a projected net deficit for the first half of the year.

Finally, Intel expects earnings of about $3.60 per share for this year on revenue of about $76 billion. Looking at the year as a whole, rather than focusing on specific quarters, analysts appear more skeptical, forecasting $3.37 per share on revenue of $74.88 billion.

As a result, by keeping the annual guidance unchanged, Intel is under pressure to deliver in the second half of the year. Even with potential headwinds, Intel CEO Pat Gelsinger said he expects Intel to do just that.

“We have strong growth across all of the company’s business areas,” Gelsinger told analysts during the call. “Well, the emphasis is generally on the second half of the year.”

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Read: Why Semiconductor Stocks Are ‘Almost Uninvestable’ Despite Record Profits Amid Global Shortage

Intel reported first-quarter net income of $8.11 billion, or $1.98 per share, compared to $3.36 billion, or 82 cents per share, in the same period last year. After adjusting for acquisition-related expenses and other items, Intel reported earnings of 87 cents per share, compared to $1.34 per share a year ago.

Revenue fell to $18.36 billion from $19.67 billion in the same quarter last year. Excluding the memory business that was divested from the company, the company reported revenue of $18.6 billion in the same period last year.

Analysts expected earnings of 78 cents a share on revenue of $18.33 billion, based on Intel’s forecast of 80 cents a share and revenue of about $18.3 billion.

As Intel maintains the outlook for the year, it does so in the face of several potential headwinds. Chief Financial Officer David Zinsner outlined a number of them moving forward, including consumer and education demand compared to the initial surge in PC sales due to COVID-19, and sales losses to Russia and Belarus.

Read: The epidemic PC boom is over, but its legacy will live on

Moreover, component supply restrictions remain a challenge with the latest COVID shutdowns in Shanghai that are increasing supply chain risks and contributing to inflationary pressures having a negative impact on PC. [total addressable market] Zenner said. “As a result, we see OEMs continue to lower inventory levels to better match demand and align with other system components. We expect that inventory components will burn to continue the second quarter decline into the second half of the year.”

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However, Zinsner said the company expects stronger sales from the data center and customer computing segments in the second half of the year.

Intel reported first-quarter sales in the critical data center category rose 22% to $6 billion, but short of Street’s estimate of $6.78 billion. Revenue from customer computing, the traditional PC group, fell 13% to $9.3 billion, less than Wall Street’s estimate of $9.42 billion. However, Intel has recently reorganized its business segments.

Read: The end of single-chip wonders: Why Nvidia, Intel, and AMD ratings have seen massive upheaval

In the first quarter, Intel posted gross margins of 53.1% on a non-GAAP basis from 58.8% a year earlier. Intel forecast profit margins of 52% for the first quarter in January.

Over the past 12 months, Intel’s stock is down 18%. During the same period, the Dow Jones Industrial Average DJIA,
+ 1.85%
— of which Intel is a component — gained less than 1%, the PHLX Semiconductor SOX Index,
+ 5.58%
down nearly 4%, the S&P 500 SPX,
+ 2.47%
Gained nearly 3%, the high-tech Nasdaq Composite Index,
+ 3.06%
It has decreased by more than 8%.