Intel expects to lose money in the current quarter, an announcement that surprised investors in the face of a worse-than-expected picture painted by the company for the personal computer and data center markets.
The company’s shares collapsed 9.5% the day before after the announcement and this Friday (27) showed a fall of almost 8%, contaminating the sector.
“We stumbled, we lost share, we lost momentum,” Chief Executive Pat Gelsinger told investors. “We believe that will stabilize this year.” He also said that Intel has been losing market share in data centers, a sign of rival AMD’s strength in the sector.
Two of Intel’s most important markets are showing weakness after two years of strong growth. Now, the PC industry is facing an oversupply of chips after demand for consumer electronics slumped and business customers, worried about a recession, are cutting back on investment in data centers.
Gelsinger told Reuters that customers were also eating up inventory.
“We expect literally some of the biggest inventory corrections we’ve seen in the industry, affecting the direction of the first quarter in a significant way,” said the executive.
“Everything depends on the recovery of the PC market. AMD is not immune to this either,” said Wayne Lam, an analyst at CCS Insight. “Don’t think we’ve seen bottom for Intel… They are not running a sustainable business model.”
Intel expects profit margins to fall further after falling from 58.4% in Q4 2020 to 43.8% in Q4 2022. “It’s safe to say ambitions to return to a 60% margin in the future are light years away,” said CFRA Research analyst Angelo Zino.
Intel reiterated its medium-term target of having a gross margin between 51% and 53% and 54% to 58% in the long term.
PC shipments fell 16.5% to 292.3 million units in 2022, according to data from market research firm IDC, forcing chipmakers to cut production and revenue forecasts.
Sluggish demand for PCs has also weighed on Microsoft’s personal computing business, which includes the Windows operating system, devices and Internet search revenue. As a result, the company recorded a 19% drop in segment revenue in the second fiscal quarter.
After Gelsinger returned to Intel nearly two years ago, the company has focused on regaining leadership in chip-making technology. Outsourcing the semiconductor manufacturing process has helped rivals like AMD develop much smaller and faster chips and outpace Intel’s technology.
Intel forecast first-quarter revenue in the range of about $10.5 billion to $11.5 billion. Analysts, on average, expected revenue of $13.93 billion, according to Refinitiv data.
The company expects an adjusted loss of $0.15 per share for the current quarter, against expectations for a profit of $0.24.
Fourth-quarter revenue fell 32% to $14 billion. Analysts, on average, expected revenue of US$ 14.46 billion in the period.
Source: CNN Brasil
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