Intel Reports Worst-Ever Quarterly Loss... "Deficit Expected in Q2 as Well"

by Jo Youjin

Published 28 Apr.2023 09:19(KST)

Q1 Net Loss Turns to Deficit of $2.76 Billion

U.S. semiconductor company Intel posted a record loss approaching 4 trillion won in the first quarter of this year. Due to a decline in personal computer (PC) demand and an accumulation of semiconductor inventory, sales plummeted, resulting in the lowest revenue level in the past 13 years.

On the 27th (local time), Intel announced in its earnings report that its net loss for the first quarter reached $2.76 billion (approximately 3.7 trillion won). This marks a turnaround from a net profit of $8.1 billion in the same period last year, representing the worst quarterly loss in history. Compared to the previous largest loss in the fourth quarter of 2017 ($687 million), this is more than four times higher.

During the same period, revenue fell sharply by 36% year-on-year to $11.7 billion (approximately 15.67 trillion won). This is the worst quarterly revenue record since 2010. Intel has experienced a continuous decline in revenue for five consecutive quarters since the first quarter of last year. The Wall Street Journal (WSJ) described it as "the lowest revenue level not seen since 2010."

This deterioration in performance stemmed from the poor performance of Intel's largest revenue source, the CCG (PC CPU division) business unit. The PC division's first-quarter revenue was $5.8 billion, down 38% from the same period last year.

During the COVID-19 pandemic period, PC sales showed a brief recovery due to the expansion of remote work and non-face-to-face culture, but have been worsening with the transition to the endemic era. According to market research firm International Data Corporation, global PC shipments in the first quarter decreased by 29% year-on-year.

The first key to a recovery in performance lies in the recovery of PCs in the CCG division, which accounts for nearly half of sales. David Zinsner, Intel's Chief Financial Officer (CFO), said, "The market will return to normal by the end of the year when PC manufacturers deplete inventory and place new orders."

[Image source=Reuters Yonhap News]

Intel forecasted that losses would continue into the second quarter. The company projected second-quarter revenue to be between $11.5 billion and $12.5 billion, which aligns with market expectations ($11.74 billion).

The WSJ analyzed that concerns over a global economic recession due to inflation and high interest rates in various countries have caused semiconductor demand to plummet and competition to intensify, delivering a direct blow to earnings.

In response to the unfavorable business environment, Intel is focusing on cost reduction. Pat Gelsinger, Intel's Chief Executive Officer (CEO), stated, "We will reduce costs by up to $10 billion annually by the end of 2025 in areas such as sales expenses and operating costs." He also explained that the workforce restructuring aimed at addressing performance deterioration due to reduced demand and recession concerns is now somewhat on track.

Intel's stock, listed on the U.S. Nasdaq market, closed up 2.79% at $29.86 on the day. After-hours trading saw the stock fall by over 2% due to disappointment over the earnings report but then rebounded nearly 5%. Despite the record loss, expectations that semiconductor inventory will soon be depleted appear to have boosted investor sentiment.