Intel posted some pretty dismal results on Thursday as the company’s quarterly earnings fell both quarter-over-quarter and year-over-year. The company will remain profitable in 2022, but said profits will fall further this quarter as customers aggressively reduce inventories. Intel expects sales to decline further in the next quarter.
Declining revenues, lower profit margins
Intel’s fourth quarter 2022 revenue fell to $14 billion, down 32% from the same period last year. The company’s gross margin fell to 39.2% from his 53.6% in the fourth quarter of fiscal 2021.
The 39.2% gross margin is Intel’s lowest gross margin in decades, if not decades. Also, the company lost $664 million in the quarter. Largest quarterly loss everIn the fourth quarter of 2017, the PC market contraction resulted in a loss of $687.
The overall results for the year are also not good. His 2022 revenue for Intel was 63.1 billion, down 20% year-on-year, with gross profit down to 42.6%, but net profit of $8 billion, or 60% down year-on-year.
The company acknowledges that the results are nothing to brag about, and instead emphasizes that it is working to meet its strategic goals despite the enormous challenges. He said he had to adjust operating costs, revise roadmaps and even cut headcount.
“Despite economic and market headwinds, we remain on track with our strategic transformation in the fourth quarter, including advancing our product roadmap, improving operational structures and processes to increase efficiency, and delivering at the lower end of our guide range. We made it,” said Pat Gelsinger, Intel Chief Executive Officer. “In 2023, we will continue to strive to deliver on long-term commitments, such as delivering leadership products underpinned by an open, secure platform, powered by large-scale manufacturing and our incredible team, while continuing to meet short-term challenges. continue to navigate.”
The Client PC and Data Center business units are barely profitable
Intel’s Client Computing Group, the company’s bread and butter, had revenue of $6.6 billion last quarter, down from $10.3 billion a year earlier. Nevertheless, with an operating margin of 11%, the division provided Intel with non-GAAP earnings of approximately $700 million.
Intel attributes lower revenue to weak consumer and educational PC demand and PC OEM inventory reductions. The company didn’t say whether it had to sell certain client PC products at steep discounts this quarter, but client CPU and chipset sales were down 36% year-over-year. This decrease seems to have something to do with Both average selling price and volume. Intel also said that products made with the Intel 7 manufacturing process (aka 10nm Enhanced SuperFin) have relatively high production costs, affecting profitability.
For the Data Center and AI Group, revenue declined to $4.3 billion from $6.4 billion a year ago, while profitability declined to $400 million from $2.4 billion in the fourth quarter last year.
Profits and profitability of its DCAI business have shrunk due to weak demand for servers and competitive pressure from AMD, according to Intel. Given that Intel had to delay his latest Xeon Scalable ‘Sapphire Rapids’ CPUs by over a year, it’s no surprise that AMD is holding back Intel’s launch. It’s also worth noting that Intel’s data center business is nearly twice as profitable as his client PC business, which sells low-margin products.
But while Intel’s CCG and DCAI groups were at least profitable, Intel’s Accelerated Computing Systems and Graphics Group (AXG) lost $441 million out of $245 million in revenue, down from a year earlier. 1% increase. Last year, Intel finally launched discrete Arc graphics processors for desktops and laptops, which apparently didn’t add much to the group’s bottom line. So it’s good that AXG has narrowed its deficit, but it’s still unprofitable.
Interestingly, Intel’s Network and Edge Group (NEX) maintained revenue of $2.1 billion (flat year-on-year), but profitability fell from $352 million in Q4 FY21 to Q4 FY22. reduced to $58 million.
The company’s Intel Foundry Services revenue grew 30% year-over-year to $319 million. However, Intel said it still incurred an operating loss of $31 million as it needed funding to support strategic growth.
Intel’s MobileEye is another business showing steady year-over-year growth despite economic turmoil. Increased EyeQ and SuperVision recorded his $565 million in revenue, up 59% year over year. Additionally, he generated $210 million in net income from $123 million the year before.
No forecast for the full year
Intel did not provide a full-year earnings outlook given the uncertainty in its core CCG and DCAI business units. Meanwhile, the company expects first-quarter 2023 revenue to be between $10.5 billion and $11.5 billion, well below fourth-quarter 2022 revenue.
Such expectations can be explained by aggressive destocking by PC OEMs and server makers, which Intel expects to occur in Q1 2023. Intel, on the other hand, on its recent product launches (Mobile Raptor Lake, Sapphire Rapids, Ponte Vecchio).
