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Following its weak Q2 2022 financial report, Intel has now given a reduced full-year guidance, blaming a rapid decline in economic activity.
“We do think we’re on the bottom.”
Shares of the leading semiconductor company sank 10% in Thursday’s extended trading following Q2 results that fell short of analysts’ expectations. Furthermore, the substantial revenue decline also represents Intel’s biggest deficit in over a decade. As a result, the chip giant has also cut its full-year guidance.
A Look into Intel Q2 2022 Report
Intel’s revenue dropped 22% year-over-year (YoY) for the second quarter, despite launching new chips. Furthermore, according to Refinitiv, revenue missed analysts’ expectations by 14%, at $15.32 billion compared to $17.92 billion for the period. This also represents the largest top-line underperformance for the American technology company since 1999.
For its Q2 2022 report, Intel sustained a heavy net loss of $454 million. This starkly contrasts the $5 billion net income the semiconductor multinational raked in during the year-ago quarter. There is also a huge disparity between Intel’s reported earnings per share and the consensus estimate for the just-concluded quarter. According to the company’s report, EPS came in at 29 cents per share adjusted, versus the much higher 70 cents per share expected. Meanwhile, Intel’s gross margin also shrank to 36.5% from 50.4% in the preceding quarter.
Intel ascribes its less-than-stellar sales to a sharp decline in economic activity. In addition, the company now forecasts a 10% decline in overall PC sales for the year. This is because of the rising inflation and higher interest rates that have impacted the purchasing power of prospective buyers. Moreover, there is now less emphasis on working remotely in the post-covid era, a period that increased demand for PCs in the first place.
Speaking on Intel’s Q2 and related developments in a conference call with analysts, chief executive officer Pat Gelsinger explained:
“The sudden and rapid decline in economic activity was the largest driver of the shortfall but Q2 also reflected our own execution issues in areas like product design, and the ramp of AXG [Accelerated Computing Systems and Graphics Group] offerings.”
Other Noteworthy Takeaways from Intel Development
Gelsinger stated that Q2 earnings are below Intel’s expectations and what it “committed to shareholders”. The Intel CEO concluded by expressing the company’s disappointment at the underwhelming performance. He also added that the world-renowned semiconductor manufacturer is still dealing with covid-related supply shortages that have delayed product availability.
Intel gave revenue guidance of 35 cents in adjusted earnings per share on $15 billion to $16 billion in revenue. Meanwhile, analysts polled by Refinitiv had it at 86 cents in adjusted earnings per share on $18.62 billion in revenue.
Intel also lowered its full-year expectations to adjusted earnings of $2.30 per share and between $65 billion and $68 billion in revenue. Meanwhile, only three months prior, the chip giant’s guidance was $3.60 in adjusted earnings per share on $76.0 billion in revenue. Once again, the analysts’ poll had this figure at $3.42 per share in earnings and $74.34 billion in revenue.