Intel tops Wall Street estimates, but falls a little short on outlook

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CORRECTION: A previous version of this article included an inaccurate number for Intel’s second-quarter profit forecast. It has been updated.

Intel Corp. shares surged in the extended session Thursday, swinging from an initial loss after the chip maker topped Wall Street estimates for the quarter, and Chief Executive Pat Gelsinger assured analysts that the company’s data-center business was improving.

Intel shares gained 5% after hours, after dropping as much as 3% earlier, on the heels of a 2.8% gain in the regular session to close at $29.86.

Gelsinger told analysts he’s encouraged by signs of progress in Intel’s data-center business.

“This was a good quarter for our data-center business, a very healthy roadmap,” Gelsinger said. “We did better than we forecast in Q1 market share.”

Data-center AI group sales dropped 39% to $3.7 billion, while the Street had estimated revenue of $3.51 billion. Intel’s main competitors in the data-center space are Nvidia Corp. and Advanced Micro Devices Inc.

“We saw better-than-forecast market segment share,” Gelsinger said. “We also saw some green shoots for the first time in China, and we’re encouraged.”

With some estimates reaching 30%, Gelsinger cleared up questions of how much the company is underselling, telling analysts Intel under sold into the market by about 20% in first quarter, and that rate will continue into the current quarter.

Client computing group, or PC, sales also did better than expected, and fell 38% to $5.8 billion, while analysts expected $4.95 billion.

The company reported a better-than-feared first-quarter loss of $2.76 billion, or 66 cents a share, versus net income of $8.11 billion, or $1.98 a share, in the year-ago period. Intel was expected to report a loss of more than $3 billion, or 76 cents a share, according to FactSet, but it was still the largest quarterly loss on record for the company. In records dating back to 1993, Intel had never reported a GAAP loss of more than $687 million, according to Dow Jones Market Data.

After adjusting for restructuring charges and other items, Intel reported a loss of 4 cents a share, versus net income of 87 cents a share from a year ago. Analysts had forecast a loss of 16 cents a share. Records dating back to 2009 do not show the chip maker ever posting an adjusted quarterly loss, according to Dow Jones Market Data.

Adjusted gross margins came in at 38.4%, down from 53.1% a year ago. Last quarter, Chief Financial Officer David Zinsner said a “significant inventory burn” on PC inventory would hit gross margins by 400 basis points in the first quarter. Intel forecast gross margins of 39% for the first quarter.

Revenue declined to $11.71 billion from $18.35 billion in the year-ago quarter, for an 11th straight quarter of year-over-year declines, while analysts surveyed by FactSet had forecast $11.03 billion.

Network and edge sales fell 30% to $1.5 billion, compared with the Street consensus of $1.66 billion. Foundry services revenue declined 24% to $118 million, while the Street estimated $272.9 million.

Meanwhile, Mobileye Global Inc. the autonomous-driving components maker that Intel spun off in an IPO in October and still owns 94% of, logged its worst day Thursday, dropping as much as 30%, and closing down 16.1% at $36,14.

Intel said Mobileye sales rose 16% to $458 million, while analysts were looking for $498.1 million.

Intel forecast a loss of 4 cents a share on revenue of about $11.5 billion to $12.5 billion and adjusted gross margins of about 33.2% for the current quarter. Analysts surveyed by FactSet had estimated an adjusted break-even quarter per share on revenue of $11.73 billion.

Year to date, Intel’s stock has started catching up to its peers, rising 13% compared with the PHLX Semiconductor Index’s 16.2% increase and the tech-heavy Nasdaq Composite’s 16% gain. Meanwhile, the S&P 500 has advanced 7.7% and the Dow Jones Industrial Average — which counts Intel as one of its 30 components — has ticked 2.1% higher on the year.

Late Tuesday, Texas Instruments Inc. topped expectations for results, issued a cautious forecast, and provided some much-needed end market visibility to analysts looking for a bottom to the chip glut.

After the bell Wednesday, KLA Corp. shares rose after the chip-making equipment provider pointed to stability in its end markets amid an initially disappointing outlook, following last week’s earnings reports from Lam Research Corp. and ASML Holding NV

Additionally, Wolfspeed Inc. shares fell after the silicon-carbide chip maker forecast weak sales for the fiscal fourth quarter and next year.

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