Intel gives one of its grimmest forecasts ever, slamming shares

Ian King, Subrat Patnaik, Bloomberg News on

Published in Business News

Intel Corp. is forecasting one of the worst quarters in its history, touching off a broader selloff of chips companies as a slowdown in personal-computer sales ravages the industry.

Late Thursday, Intel gave a sales range that missed analysts’ estimates by billions of dollars, warning that revenue could fall to the lowest quarterly level since 2010. Shares plunged 10%, the most since July, in New York. Advanced Micro Devices Inc., Applied Materials Inc., Lam Research Corp. and Qualcomm Inc. declined. Semiconductor maker KLA Corp., which issued its own disappointing outlook, also slid.

Chip companies are reeling over a steep decline in demand for PC processors that has wiped out profits and led to deep cuts across the industry. Intel’s outlook signals more pain to come. The company is eliminating jobs and slowing spending on new plants in an effort to save as much as $10 billion. It’s taking an especially large hit from losing market share to rivals.

“This company is no longer the bellwether it used to be for the chip stocks, but it’s still an important one,” Matthew Maley, chief market strategist at Miller Tabak + Co. “Therefore, the fact the stock is reacting so poorly to its earnings report should weigh on the broad market today.”

It was a painful admission for a company that has been attempting a multiyear comeback under Chief Executive Officer Pat Gelsinger, who took the helm in 2021. A post-pandemic downturn for Intel’s main business, PC chips, has torpedoed efforts to get the company’s financial performance back on course. Instead, it’s only losing more ground.

“I’d like to remind everyone that we’re on a multiyear journey,” Gelsinger said during a conference call.


Forecast miss

The stock had increased 14% this year, part of a rally for chip equities, but Intel’s decline wiped out most of that gain.

The company predicted that its gross margin — the percentage of sales remaining after deducting the cost of production — would be 39% in the first quarter. That’s down 14.1 points from the same period a year ago and more than 10 points narrower than that of its nearest rival, AMD.

First-quarter sales will be $10.5 billion to $11.5 billion, the chipmaker said. That compares with an average Wall Street estimate of $14 billion. Intel expects to lose 15 cents in the quarter, excluding some items. Analysts had projected a profit of 25 cents. Excluding certain items, earnings were 10 cents a share. Wall Street was looking for a profit of 19 cents on sales of $14.5 billion.


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