The decline in demand for personal computers is unfortunate for Intel.
David Paul Morris/Bloomberg
Intel’s earnings for the second quarter came in far lower than expected, and the firm offered a gloomy prognosis for the current quarter, which caused the stock to drop significantly.
The leadership of the semiconductor manufacturer pointed the finger at a deteriorating macroeconomic environment, but they also admitted that some of the company’s problems were self-inflicted.
Pat Gelsinger, the CEO of Intel, was quoted in the news release as saying that the company’s performance during this quarter did not meet the expectations it had set for itself or its shareholders. “We have to and will perform at a higher level. The most significant factor was the sharp and immediate slowdown in economic activity; nonetheless, the gap also indicates problems with our own execution.
The semiconductor business announced adjusted profits per share for the second quarter of 29 cents, which was far lower than the consensus forecast of 69 cents among analysts polled by FactSet.
The revenue was $15.3 billion, which is significantly lower than the analysts’ projections of $17.94 billion.
Intel has projected that its sales for the upcoming quarter will be between $15 billion and $16 billion, which is significantly lower than the average estimate of $18.72 billion. In addition, the company provided a revised revenue range forecast for the entire year of $65 to $68 billion, which is lower than the estimate provided by the market of $74.5 billion.
Following the announcement, Intel’s stock dropped by as much as 9 percent in the short term.
During the conference call, the management of the company stated that Intel’s data centre business would develop at a pace that was slower than the market as a whole. According to predictions made by analysts on Wall Street and in Barron’s, the chip manufacturer is anticipated to lose market share to its primary rival Advanced Micro Devices (AMD). The Chief Financial Officer of Intel also stated that a “recessionary scenario” could become a reality later on in this year. As a result, the chip manufacturer’s capital investment plans for 2022 were slashed from $27 billion to $23 billion.
The amount of demand for computers has been decreasing, which has resulted in a lower demand for chips. According to a survey that was released by IDC earlier this month, worldwide shipments of personal computers experienced a decline of 15 percent when compared to the same period a year earlier. According to the research organisation, the decline can be ascribed to “macroeconomic headwinds,” which include factors such as rising inflation and disruptions in supply-chain networks.
As of the closing of trading on Thursday, Intel share prices were down 23 percent for the year. During the same time frame, the performance of the ICE Semiconductor Index has been tracked by the iShares Semiconductor ETF (SOXX), which has experienced a decrease of almost 26 percent.