Connect with the top gaming leaders in Los Angeles at GamesBeat Summit 2023 from May 22-23. Register here.
Intel reported fourth-quarter earnings that fell short of analyst expectations as the major chipmaker struggles with declining demand.
The Santa Clara, Calif.-based chipmaker also said it had already taken steps to “sizing” the company’s fourth-quarter workforce. While Intel has been a benchmark for games, its rival Advanced Micro Devices has grown much faster and gained market share. AMD will report the results on January 31.
Intel also said it expects to report an adjusted loss of 15 cents per share in the current first quarter ending March 31. Analysts had expected to see earnings of 24 cents per share in the first quarter, which is one reason the stock is under pressure. In aftermarket trading, Intel shares fell 8.4% to $27.55 per share.
Intel said fourth-quarter revenue was $14 billion, compared to the $14.4 billion analysts expected. Adjusted earnings per share were 10 cents, versus the expected 19 cents per share.
The data center and AI division reported $4.3 billion in revenue, down 33% from $6.4 billion a year ago, but better than analysts’ expectations of $4 billion. The client computing division reported revenue of $6.6 billion, down 36% from $10.3 billion a year ago, compared to the expected $7.4 billion.
In Q1, Intel said it expects revenue of $10.5 billion to $11.5 billion, compared to expectations of $14 billion. Gross margin is expected to be 39% and loss will be 15 cents per share. Analysts were looking for 45.5%. Long term, Intel hopes to return to 51% gross margins.
Intel’s Mobileye division reported revenue of $565 million, up 59% from $356 million a year ago. The operating result for that group was 71% higher than a year ago. Intel’s new accelerated systems and graphics group reported $247 million in Q4, up 1% from $245 million a year ago. Intel also said Intel Foundry Services was $319 million, up 30% from $245 million a year ago. Both the graphics and foundry groups are losing money.
As you can see, consumer PC sales are falling as consumers have already spent a lot of money to upgrade their home systems during the pandemic and may no longer need upgrades.
Gartner reported that PC shipments worldwide fell 28.5% in the fourth quarter. In light of this recession, Intel CEO Pat Gelsinger is investing heavily in chip manufacturing. That seemed like a very smart bet during the pandemic, when inventory shortages were rampant. Now it’s definitely a risky move given the downturn and declining demand.
Still, Intel is building a $20 billion factory in Ohio, hoping to take advantage of the Chips and Science Act, a $54 billion measure aimed at investing in electronics infrastructure and manufacturing in the US. Those are all bets that chip manufacturing is strategically important, both to the country and to Intel. But Intel is not yet sure how much money Intel will get through the legislation.
As for the “right sizing,” Intel hasn’t yet specifically said what the impact on its workforce will be, other than helping the company save $3 billion. It could save $8 billion to $10 billion by 2025. Intel said it would not provide long-term guidance beyond the first quarter. The company said it manages its cash flow.
During Q4, the 13th generation Intel Core desktop processor family became available, starting with desktop “K” processors and the Intel Z790 chipset.
Intel ended the quarter with 131,900 employees, up from 131,500 in the third quarter and 121,100 a year ago. Speaking to analysts, Gelsinger said the company is seeing strong demand for its Sapphire Rapids chips and that he sees growing customer confidence. While Intel has lost market share, Gelsinger said that “the installed base is with Intel.”
He added: “We stumbled. We lost our share.” But he said he sees Intel poised to regain market share in the long run. He acknowledged that Intel had lost market share by 2022 and that it would address that this year with better products as it ramps up new chips.
Gelsinger said he believes Intel will recapture the technology leadership and will make the capital investment to do so. But he noted that the company has downgraded all investments based on current demand being lower than expected. He thinks entrepreneurship and China will come back faster than the cloud.
GamesBeat’s credo in covering the gaming industry is “where passion meets business”. What does this mean? We want to tell you how important the news is to you — not only as a decision-maker in a game studio, but also as a fan of games. Whether you’re reading our articles, listening to our podcasts, or watching our videos, GamesBeat helps you learn about and have fun with the industry. Discover our Briefings.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.