Intel misses analyst targets as it struggles with a slowdown

Intel reported fourth-quarter earnings that failed to hit analyst expectations as the big chip maker struggles with slowing demand.

The Santa Clara, California-based chip maker also said it had already taken measures to “right-size” the company’s headcount during Q4. While Intel has been a bellwether for games, its rival Advanced Micro Devices has been growing at much faster rates and taking market share. AMD reports earnings on January 31.

Intel also said it expects to report an adjusted loss of 15 cents a share in the current first quarter ending March 31. Analysts had expected to see a profit of 24 cents a share in Q1, and that’s a reason the stock is under pressure. In after hours-trading, Intel’s stock is down 8.4% to $27.55 a share.

Intel said Q4 revenue was $14 billion, compared to the $14.4 billion expected by analysts. Adjusted earnings per share were 10 cents, versus the expected 19 cents a share.

The datacenter and AI division reported $4.3 billion in revenue, down 33% from $6.4 billion a year ago but better than the expected $4 billion from analysts. The client computing division reported revenue of $6.6 billion, down 36% from $10.3 billion a year ago, compared with the $7.4 billion expected.

In Q1, Intel said it expects revenue of $10.5 billion to $11.5 billion, compared to expectations of $14 billion. Gross margins are expected to be 39%. Analysts were looking for 45.5%.

Intel’s Mobileeye division reported revenues of $565 million, up 59% from $356 million 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.

As you can tell, consumer PC sales are dropping as consumers have already spent a lot of money during the pandemic to upgrade their home systems and may no longer need upgrades.

Gartner reported Q4 PC shipments were down 28.5% worldwide. In the face of this downturn, Intel CEO Pat Gelsinger is investing heavily in chip manufacturing. That looked like a very smart bet during the pandemic when supply shortages were rampant. Now it’s definitely a risky move, given the downturn and the lessening of demand.

Still, Intel is building a $20 billion factory in Ohio, and it hopes to benefit from the Chips and Science Act, a $54 billion measure aimed at investing in electronics infrastructure and manufacturing in the U.S. Those are all bets that manufacturing of chips is strategically important, both to the country and to Intel.

As for the “right-sizing,” Intel has not yet specifically said what the impact on its workforce will be, beyond helping it save $3 billion. It could save $8 billion to $10 billion by 2025.

During Q4, the 13th Gen Intel Core desktop processor family became available, starting with desktop “K” processors and the Intel Z790 chipset.

Intel closed the quarter with 131,900 employees, slightly up from 131,500 in Q3 and 121,100 a year ago.