Intel inside a world of pain as revenue plunges by a third
Intel CEO Pat Gelsinger has expressed confidence in the company’s trajectory despite posting a $700 million net loss on revenues that plunged 32 percent during the fourth quarter of FY 2022, to a measly $14 billion.
“Clearly the financials aren’t what we hoped for, but we’re also pleased with the execution process we made,” a somewhat subdued Gelsinger mustered during Thursday’s earnings call. “The macro is difficult. It was difficult in Q4. We expect it to remain difficult as we go through the first half of the year, but we’re laser focused on controlling the things that we can.”
In Q4, Intel reported double-digit revenue declines across its two largest business units. The company’s Client Computing Group (CCG), which includes its desktop and laptop CPUs, saw the largest declines, slipping 36 percent to $6.6 billion as the PC market continued to decline thanks to plague years buying rush and the cooler economic climate that followed.
Intel’s Datacenter and AI group (DCAI) didn’t fare much better, diving 33 percent year over year to $4.3 billion. It’s worth noting that despite launching its Sapphire Rapids Xeon Scalable processors — its first new datacenter chip in nearly two years — earlier this month, those chips are only now making their way to customers. As such, the company is unlikely to realize revenues from sales of those parts until the first quarter of 2023 at the earliest. Full year, Intel’s CCG and DCAI groups were down 23 percent and 15 percent respectively.
The company’s network and edge (NEX) business unit — its third largest division and a bright spot for the company in recent quarters — also showed signs of slowing demand during the fourth quarter. The division saw revenues decline one percent year over year to 2.1 billion, marking a stark departure from the double digit gains the group has posted in recent times. Despite the sudden downturn, the division still managed to grow 11 percent during the 2022 fiscal year.
And while Accelerated Computing Systems and Graphics (AXG) only managed a one percent gain during the fourth quarter, the relatively new division managed to grow revenues by eight percent in 2022 to $837 million.
Intel’s smaller divisions, including Mobileye and Intel Foundry Services (IFS) also maintained positive momentum, respectively growing 59 percent and 30 percent during the quarter and 35 percent and 14 percent in during the 2022 fiscal year.
Gelsinger touted the company’s wins over the 2022 fiscal year, highlighting the launch of its Mount Evans FPGAs, 13th-Gen Core processors, a litany of new foundry projects and fab expansions, and the long-awaited launch of its Sapphire Rapids datacenter processor families. However, full-year financials tell a different story: revenue fell 20 percent to $63 billion.
Gelsinger and CFO David Zinsner’s tried to find positives in Intel’s deteriorating numbers. But they struggled to see better days ahead, admitting that stiffer macroeconomic headwinds would make life hard. Investors were told that in Q1 2023 Intel would win $10.5 billion to $11.5 billion in revenues, a 37 percent year-over-year decline in the best-case scenario.
The company didn’t provide guidance beyond the first quarter of 2023, but Gelsinger told analysts that expected the company would begin to recover in the second half of the year.
Execs re-iterated Int’s previously announced plan to slash spending by $3 billion in 2023, and expand that figure to between $8 billion and $10 billion by 2025. And while Gelsinger had said the company would lay off a “meaningful number” of employees and cancel products during the prior quarter, no mention of either was given during the company’s Q4 earnings call.
Intel’s lackluster earnings and worse outlook caps of a week of bad press for the chipmaker. The past few days have seen the company announce hundreds of layoffs at its California offices, termination of a planned $700 million liquid and immersion cooling lab, and board chair Omar Ishrak’s decision to step down from his role. ®