Intel shares fall 8% after poor earnings show weaker demand

Intel shares closed down 8% on Friday, a day after the company reported disappointing second-quarter earnings that fell short of results.

Intel’s revenue was down 22% year over year and missed the consensus by 14%, the company’s biggest top-tier disappointment since 1999, according to Refinitiv data. It ended the quarter with a net loss of $454 million, compared to net income of $5 billion in the prior year quarter.

The company also lowered its expectations for the full year. Intel said it now sees full-year adjusted earnings of $2.30 per share and revenue of $65 billion to $68 billion, which is lower than guidance from three months ago.

The updated forecast takes into account weak economics that could result in organizations procrastinating on PC refresh cycles, David Zinsner, Intel’s chief financial officer, told CNBC in an interview. He said that small and medium-sized companies have decreased their purchase of computers, but the company has remained.

“We think we’re at the bottom,” Zinsner said.

Pat Gelsinger, CEO of Intel Corporation, holds up a semiconductor chip as he testifies during the Senate hearing on Commerce, Science, and Transportation titled Developing Next-Generation Technology for Innovation, at the Russell Senate Office Building on Wednesday, March 23, 2022.

Tom Williams | CQ-Roll Call, Inc. | fake images

Analysts at Susquehanna downgraded shares of Intel to negative from neutral, saying that while they’d like to think this was a one-time reset, problems remain.

“For decades, Intel was able to cover up a litany of failed projects, poor acquisitions, and strategic weaknesses by leveraging Moore’s Law and process leadership,” the analysts wrote in a report Friday. “Unless they regain this leadership (we think unlikely), or change strategic direction, we expect Intel’s growth, profitability and cash flow issues to persist.”

Baird analysts also downgraded Intel, citing concerns about supply chain delays and changes in consumer patterns following the pandemic.

“We are increasingly concerned that more than 20 days of inventory in the PC supply chain will take quarters to develop, given what we believe to be structural changes in consumer PC consumption patterns, combined with a first half seasonally weak that would continue to pressure Intel’s utilization rates and gross margin recovery,” they said in a report on Friday.

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