Intel’s financials for the fourth quarter of 2022 have been released, and the results are not good. Revenue totaled $14.0B, a major 32% decline from the year-ago quarter, and Intel reported a net loss of $661M for the quarter, a 114% decline in net income. This was lower than the low end of their already conservative forecasted range.[0] On a yearly basis, Intel’s revenue was down 20% to $63.1B, with net income falling 60% to $8B.
Going forward, Intel is expecting further declines in revenue and deeper losses in the first quarter of 2023.[1] Revenues are expected in the range of $10.5 billion to $11.5 billion, while losses will likely be about 15 cents per share.[1] Yahoo Finance data suggests that analysts are estimating a first quarter earnings of $0.26 for Intel and $1.81 per share for the entire year.[2]
Intel blames the poor earnings on the economic downturn and inflation, which dragged down chip demand, as well as weak PC demand in consumer and education and PC OEM inventory reductions.[0] Intel also noted that products made on its Intel 7 fabrication process (aka 10nm Enhanced SuperFin) are relatively costly to produce, affecting its profitability.[3] Moreover, Intel hasn’t been helped by some of its product release cadences, such as the next-generation Sapphire Rapids server platform only finally launching a few weeks ago, in the first quarter of 2023.[4]
In an effort to help with the margins, Intel increased the estimated useful life of certain production machinery and equipment from five years to eight years.[5] This is expected to reduce total depreciation expense in 2023 by roughly $4.2 billion, with an approximate $2.6 billion increase to gross profit, a $400 million decrease in R&D expenses and a $1.2 billion decrease in 2023 ending inventory values.[5] Intel’s Q1 2023 outlook includes an estimated $350 million to $500 million benefit to operating margin or $0.07 to $0.10 benefit to EPS from this change.[5]
Intel shares were poised to open nearly 10% lower at $27.20. Intel Corporation (INTC) is down 7.3% in the after-hours session, currently priced at $27.89 apiece, according to Benzinga Pro.
0. “Intel Suffers Historically Bad Quarter on Weak PC Demand, Competition” PCMag, 27 Jan. 2023, https://www.pcmag.com/news/intel-suffers-historically-bad-quarter-on-weak-pc-demand-competition
1. “Intel Plunges on Earnings Miss, Weak Guidance: ETFs in Focus” Zacks Investment Research, 27 Jan. 2023, https://www.zacks.com/stock/news/2045511/intel-plunges-on-earnings-miss-weak-guidance-etfs-in-focus
2. “Intel just took the worst beating in earnings in over a decade” AppleInsider, 27 Jan. 2023, https://appleinsider.com/articles/23/01/27/intel-just-took-the-worst-beating-in-earnings-in-over-a-decade
3. “Intel Posts Largest Loss in Years as PC and Server Nosedives” Tom’s Hardware, 27 Jan. 2023, https://www.tomshardware.com/news/intel-posts-largest-loss-in-years-as-sales-of-pc-and-server-cpus-nosedive
4. “Intel Reports Q4 2022 and FY 2022 Earnings: 2022 Goes Out on a Low Note” AnandTech, 26 Jan. 2023, https://www.anandtech.com/show/18731/intel-reports-q4-2022-and-fy-2022-earnings-2022-goes-out-on-a-low-note
5. “Intel Q4 Earnings: A True Disaster (NASDAQ:INTC)” Seeking Alpha, 27 Jan. 2023, https://seekingalpha.com/article/4572851-intel-a-true-disaster