Intel Stock Declines As Chip Maker Doubles Down On Outlook Despite Headwinds

Intel Stock Declines As Chip Maker Doubles Down On Outlook Despite Headwinds
Intel Stock Declines As Chip Maker Doubles Down On Outlook Despite Headwinds

Intel Corp. shares declined in the extended session Thursday after the chip maker held onto its full-year outlook amid expected weakness this quarter, forecasting a surge in sales from its major businesses in the second half of the year.

Intel INTC, -6.94% shares fell 4% after hours, following a 3.6% gain in the regular session to close at $46.84, and by the end of the conference call with analysts were down about 4%.

For the second quarter, Intel forecast earnings of about 70 cents a share on revenue of about $18 billion and adjusted gross margins of 51%. Analysts surveyed by FactSet, however, expect adjusted second-quarter earnings of 80 cents a share on revenue of $18.34 billion.

Still, Intel reaffirmed its outlook for the year, as the company topped earnings-per-share expectations in the first quarter, and barely surpassed revenue expectations, leaving an expected net deficit for the first half of the year.

Intel Stock Declines As Chip Maker Doubles Down On Outlook Despite Headwinds

All told, Intel expects earnings of about $3.60 a share for the year on revenue of about $76 billion. When looking at the year as a whole, instead of focusing on specific quarters, analysts appear more skeptical, forecasting $3.37 a share on revenue of $74.88 billion.

As a result, by keeping the annual guidance unchanged, Intel is under pressure to deliver in the second half of the year. Even with potential headwinds, Intel Chief Executive Pat Gelsinger said he expects Intel to do exactly that.

“We have solid growth across all the business areas of the company,” Gelsinger told analysts on the call. “So, overall affirming the second half of the year.”

Intel reported first-quarter net income of $8.11 billion, or $1.98 a share, compared with $3.36 billion, or 82 cents a share, in the year-ago period. After adjusting for acquisition-related expenses and other items, Intel reported earnings of 87 cents a share, compared with $1.34 a share from a year ago.

Revenue declined to $18.36 billion from $19.67 billion in the year-ago quarter. Excluding the company’s divested memory business, the company reported revenue of $18.6 billion in the year-ago period.

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Analysts had forecast earnings of 78 cents a share on revenue of $18.33 billion, based on Intel’s forecast of 80 cents a share and revenue of about $18.3 billion.

As Intel keeps the outlook for the year, it’s doing so in face of several potential headwinds. Chief Financial Officer David Zinsner outlined a number of them moving forward, including soft consumer and education demand compared with the initial bump in PC sales due to COVID-19, and a loss of sales to Russia and Belarus.

“Further, component supply constraints continue to be a challenge with the most recent COVID lockdowns in Shanghai further increasing supply-chain risk and contributing to inflationary pressures that are having a negative impact on PC [total addressable market] for the year,” Zinsner said. “As a result, we are seeing OEMs continue to lower inventory levels to better match demand and align with other system components. We expect elements of this inventory burn to continuing Q2 subsiding in the second half of the year.”

Even so, Zinsner said the company expects stronger sales from its data-center and client-computing segments going into the second half of the year.

Intel reported that first-quarter sales in the important data-center category rose 22% to $6 billion, but below the Street’s estimate of $6.78 billion. Revenue from client computing, the traditional PC group, fell 13% to $9.3 billion, below Wall Street’s estimate of $9.42 billion. Intel, however, recently realigned its business segments.

In the first quarter, Intel reported gross margins 53.1% on a non-GAAP basis from 58.8% a year ago. Intel had forecast margins of 52% for the first quarter back in January.

Over the past 12 months, Intel stock has fallen 18%. Over the same period, the Dow Jones Industrial Average   DJIA, -2.77% — which counts Intel as a component — has gained less than 1%, the PHLX Semiconductor Index  SOX, -4.47%  has declined nearly 4%, the S&P 500 index  SPX, -3.63%   has gained nearly 3%, and the tech-heavy Nasdaq Composite Index  COMP, -4.17%  has fallen more than 8%.