Intel Corp. shares plunged in the extended session Thursday after the chip maker missed Wall Street estimates by a wide margin and cut its outlook for the year, acknowledging a slowing market as well as execution issues.
Intel
INTC,
reported a second-quarter loss of $454 million, or 11 cents a share, versus net income of $5.06 billion, or $1.24 a share, in the year-ago period. After adjusting for acquisition-related expenses and other items, Intel reported earnings of 29 cents a share, compared with $1.36 a share from a year ago.
Revenue declined to $15.32 billion from $19.63 billion in the year-ago quarter, for an eighth straight quarter of year-over-year declines. Excluding the company’s divested memory business, the company reported revenue of $18.5 billion in the year-ago period. Gross margins dropped to 44.8% from 59.8% in the year-ago period.
Analysts had forecast adjusted earnings of 69 cents a share on revenue of $17.94 billion — estimates that had declined steadily over the past three months — based on Intel’s forecast of about 70 cents a share on revenue of about $18 billion and adjusted gross margins of 51%.
“This quarter’s results were below the standards we have set for the company and our shareholders,” said Intel Chief Executive Pat Gelsinger in a statement. “We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues.”
Shares immediately dropped more than 10% after hours, but were down about 7% at last check, as the company’s call with analysts kicked off. Shares finished the day with a 1.2% decline in the regular session to close at $39.71.
Intel reported that second-quarter sales in the important data-center and AI category fell 16% to $4.6 billion, well below the Street’s estimate of $6.19 billion.
On the call, Gelsinger said he expects Intel’s data-center sales to grow slower than the market.
“It’s not a fact we like, but the forecast we see,” Gelsinger told analysts.
Revenue from client computing, the traditional PC group, fell 25% to $7.7 billion, below Wall Street’s estimate of $8.89 billion.
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For the third quarter, Intel forecast earnings of 35 cents a share on revenue of about $15 billion to $16 billion and adjusted gross margins of 46.5%. Analysts surveyed by FactSet expect adjusted third-quarter earnings of 87 cents a share on revenue of $18.72 billion.
As many expected, Intel cut its outlook for the year to adjusted earnings of $2.30 a share on revenue of about $65 billion to $68 billion with gross margins of 49%. Earlier in the year, Chief Financial Officer David Zinsner had said he was comfortable with a gross margin forecast between 51% and 53%, and last year Gelsinger had promised margins would remain “comfortably above 50%.”
For the year, Wall Street estimates earnings of $3.34 a share on revenue of $74.46 billion. Last quarter, Intel had doubled down on an optimistic outlook for the year of about $3.60 a share on revenue of about $76 billion with gross margins of 52%, which had placed an enormous pressure to deliver in the second half of the year.
Read: The pandemic PC boom is over, but its legacy will live on
Over the past 12 months, Intel stock has fallen 25%. Over the same period, the Dow Jones Industrial Average
DJIA,
— which counts Intel as a component —has declined 6.9%, the PHLX Semiconductor Index
SOX,
has declined 10%, the S&P 500 index
SPX,
has fallen 7.5%, and the tech-heavy Nasdaq Composite Index
COMP,
has dropped 17.6%.
