Despite Forecast, Intel Earning Records 9% Drops in Q422

The world’s largest manufacturer of central processing units and semiconductors, Intel, has recorded a share dropped of more than 9% in earnings, estimating a big miss for the fourth quarter, despite a forecasted loss for the first quarter. The figures are disclosed in its fourth-quarter and full-year 2022 financial results released today.

Commenting on the figures, Intel pointed out that the data-center market was contracting and that inventory digestion would gnaw at margins.

Intel’s Market Forecast

For the current quarter, Intel INTC, +1.31% management anticipates an adjusted loss of 15 cents per share on revenue of between $10.5 billion and $11.5 billion and adjusted gross margins of around 39%. According to FactSet’s survey of analysts, adjusted first-quarter Intel earnings would have been 25 cents per share on $13.93 billion in revenue.

On a conference call with analysts, CEO Pat Gelsinger said he would not offer an estimate for 2023. Gelsinger limited the outlook to the current quarter, noting macro uncertainties, the challenge of predicting the completion of PC inventory, and a shrinking data-center business. While the Street anticipated revenue of $4.08 billion for the fourth quarter, AI group sales fell 33% to $4.3 billion.

The corporation will implement an accounting change in the first quarter under which Intel would increase the useful life of its equipment from the current five years to eight years, according to Chief Financial Officer David Zinsner. According to Gelsinger, Intel will reduce its actual capacity.

Zinsner said that a substantial inventory burn on PC inventory would reduce gross margins by 400 basis points in the first quarter when questioned about how Intel could return to the 51% to 53% profit range he promised a year ago. Gross margins for the fourth quarter decreased to 43.8% from 45.9% in the third quarter and 55.8% a year before.

Intel’s Fourth-quarter Reports

In its fourth-quarter report, Intel recorded a loss of $664 million, or 16 cents a share, versus a net income of $4.62 billion, or $1.13 a share, in the year-ago period. After adjusting for restructuring expenditures and other issues, Intel reported 10 cents per share, down from $1.13 per share a year earlier.

For the tenth consecutive quarter, Intel’s revenue decreased from $20.52 billion in the corresponding quarter to $14.04 billion. Based on Intel’s prediction of 20 cents per share on between $14 billion and $15 billion in revenue, analysts surveyed by FactSet projected Intel earnings of 21 cents per share on revenue of $14.49 billion.

Following Intel’s Step

Other chip firms, which are those most impacted by a fall in the data center industry, also fell, including top rival Advanced Micro Devices Inc. AMD, +0.33%, whose shares fell more than 3% in after-hours trading, and Nvidia Corp. NVDA, +2.48%, whose shares fell 2%.

The price of Intel stock has dropped 43% in the last year. The PHLX Semiconductor Index SOX, +1.63%, has fallen 13%, the S&P 500 index SPX, +1.10%, has declined 7%, and the tech-heavy Nasdaq Composite Index COMP, +6.59% has declined 15% over the same period. The Dow Jones Industrial Average DJIA, +0.61%, which includes Intel as a component, has fallen 1%.