After revealing a third-quarter performance that fell short of expectations, characterized by sluggish sales and forecasts that didn’t meet projected earnings and profit margins, Intel experienced a notable 8 percent decrease in its share value.
The tech giant disclosed a net income of $6.82 billion for the third quarter. On a GAAP basis, the earnings per share (EPS) stood at $1.67, with a non-GAAP EPS slightly higher at $1.71.
Intel posted a Year-over-Year (YoY) increase of 5% in GAAP revenue, reaching $19.2 billion, and a similar non-GAAP revenue uptick resulted in $18.1 billion.
During a conference call with financial analysts, Intel’s CEO, Pat Gelsinger, acknowledged that the company’s profit margins are feeling the squeeze, yet reassured that they would stay “comfortably above 50%” as the firm approaches a critical “pivot point.” Intel attributed the contraction of its computer segment to supply shortages, notwithstanding a boost in PC sales driven by the surge in remote work during the pandemic. Nonetheless, the company saw its revenues climb in the realms of Internet of Things (IoT), Data Center Group (DCG), and its Mobileye operations.
Specifically, IoT revenues soared by 54%, reaching $1 billion, surpassing an anticipated $987.6 million. Meanwhile, Mobileye revenues climbed by 39% to $326 million, although this was shy of the expected $351.3 million.
Intel reported GAAP gross margin of 55% and non-GAAP gross margin of 57%1 during the third quarter.
Pat Gelsinger elaborated on the quarter’s outcomes by stating, “Q3 cast a spotlight on the unprecedented global demand for semiconductors, where Intel holds a distinctive breadth and scale to lead. We committed to our IDM 2.0 strategy and demonstrated it through the establishment of new fabs, the announcement of our objectives to reclaim leadership in process performance, and the introduction of the most remarkable architectural advancements in over ten years. We also secured significant new business across all segments,” he continued. “The path ahead is long, but the potential is vast, and I’m inspired by the strides we’re taking to realize that potential.”
In the third quarter, Intel saw an inflow of $9.9 billion from operations and paid out $1.4 billion in dividends to its shareholders.
The report highlighted a GAAP gross margin of 55% and a non-GAAP margin of 57%1.
Focusing on the company’s future, Gelsinger said, “We are setting Intel on a course for expansion, aiming to evolve into a company characterized by sustained growth.” He added, “In the short run, we could have taken a more conservative path for modestly improved financial outcomes. However, the decision to invest more aggressively was made to optimize our long-term business trajectory.” Aligning with this, George Davis, Intel’s CFO, indicated on the call that margins are anticipated to oscillate between 51 and 53% in the coming two to three years before an upward adjustment.
Intel plans to channel a staggering $20 billion into investments this year, including the construction of a new chip manufacturing facility in Arizona. As production scales up with these new sites, investors will keep a watchful eye on Intel’s capacity to stay on top in the fiercely competitive semiconductor industry.
For the current fiscal year, Intel’s revenue projection hovers around $77.7 billion with GAAP earnings expected to be $4.50 per share and non-GAAP earnings forecasted at $5.28 per share. These figures are set against analysts’ average predictions that anticipated an adjusted annual earnings of $4.79 per share on revenue estimates of $73.59 billion.
