'Earnings Shock' Intel Lowers Annual Revenue Target by 14 Trillion Won This Year... Stock Price Drops Over 10%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] American semiconductor company Intel received a bleak report card as its second-quarter (April to June) revenue this year dropped by more than 20% compared to the same period last year, causing its stock price to plunge over 10%. The decline was attributed to reduced PC sales due to recession concerns and a sharp drop in demand for data center semiconductors. Intel also lowered its annual revenue target for this year by more than 14 trillion won from the initial forecast.

According to Bloomberg and others on the 28th (local time), Intel announced in its earnings report that its second-quarter revenue was $15.3 billion (approximately 19.9 trillion won), down 22% from the same period last year. The market had expected Intel's revenue to be around $18 billion, but it fell significantly short. CNBC reported, "The revenue missing the market consensus by 14% is the largest gap since 1999." Earnings per share were also far below the market expectation of 69 cents, at 29 cents.

The poor performance was due to a significant drop in PC demand amid recession fears and decreased sales of high-priced server semiconductors used in data centers. The Client Computing Group, responsible for PC semiconductors, posted second-quarter revenue of $7.7 billion, well below the market expectation of $8.89 billion. While PC sales have been consistently factored in as a cause of Intel's deteriorating performance this year, Bloomberg reported that the unexpected 16% decline in server semiconductor sales during the second quarter also contributed to the overall poor results.

Pat Gelsinger, Intel's Chief Executive Officer (CEO), explained, "The sudden slowdown in economic activity was the main reason for the poor performance, but internal execution issues such as product design were also reflected in the second-quarter results." He added that supply chain issues caused by COVID-19 still have lingering effects. He emphasized, "Recent results fell short of the standards set by the company and shareholders. We need to do better and we will do better."

Pat Gelsinger, Intel Chief Executive Officer (CEO)
[Image source=Reuters Yonhap News]

However, Intel announced on the same day that it lowered its annual revenue target for this year to $65 billion to $68 billion, 13% lower than the previous year, reducing the target by $11 billion from the forecast given during the earnings announcement in April. For the third quarter (July to September), revenue is expected to be $15 billion, significantly below the market expectation of $18.7 billion.

CEO Gelsinger predicted that the third quarter would hit the bottom as customers use inventory products they had not used before, resulting in no new orders. He said, "I have never seen this level of inventory adjustment in 10 years. I am confident that this is the bottom," expressing optimism that performance will rebound.

Regarding the possibility of austerity management, CEO Gelsinger dismissed such prospects. Since taking office in February last year, Gelsinger has focused on expanding business and developing technology, including resuming Intel's foundry (semiconductor contract manufacturing) business and announcing plans to start mass production of 20A (angstrom, 2nm) and 18A (1.8nm) processes from next year. He stated that spending plans for manufacturing technology, new product development, and entry into new markets will be maintained as is, adding that while austerity due to recession might strategically position the company better now, it would not be beneficial for the future.

Earlier, CEO Gelsinger had indefinitely postponed the groundbreaking ceremony for the $20 billion Ohio plant last month to urge the U.S. Congress to pass the semiconductor support bill. This bill, which includes various incentives and support for semiconductor manufacturing facilities by Intel, Samsung Electronics, Taiwan's TSMC, and others, passed the House on the day after passing the Senate, leaving only President Joe Biden's signature.

Meanwhile, after the earnings announcement, Intel's stock price plunged more than 10% but has since narrowed the decline to the 8% range.

This content was produced with the assistance of AI translation services.