Intel Posts Its Biggest Loss on Record in Q1 2023: Rock Bottom or a Sinking Ship?
Intel (NASDAQ: INTC) has now announced its earnings for the first quarter of 2023, broadly beating consensus expectations regarding its top-line and bottom-line metrics.
Intel (NASDAQ: INTC) Earnings Release for the First Quarter of 2023
For the three months that ended on the 31st of March 2023, Intel reported $11.7 billion in non-GAAP revenue. The number exceeded consensus expectations.
Revenue Comparison
(All figures are in billions of dollars)
Here is the performance of Intel's business segments in Q1 2023:
During Q1 2023, Mobileye recorded the highest growth, while Data Center and AI remained the laggard with a growth of -39 percent.
The chart below illustrates the performance of Intel's key business segments against consensus expectations:
Consensus Segmental Revenue
(All figures are in billions of dollars)
The following excerpt from the company's earnings release provides supplemental platform revenue information:
Finally, the company earned -$0.04 in EPS (non-GAAP), beating consensus expectations of -$0.16. Intel had guided to a non-GAAP EPS of -$0.15 while announcing its earnings for the fourth quarter of 2022.
Do note that Intel has reported a GAAP loss of $2.8 billion for Q1 2023. In records going back as far as 1993, the company has never reported a GAAP loss of over $687 million, as per the Dow Jones Market Data. The previous record was made in Q4 2017 when the company reported a loss of $687 million. Moreover, Intel has not reported an adjusted quarterly loss since 2009.
Here is Intel's guidance for the second quarter of 2023:
Investors have reacted negatively to Intel's latest earnings release, with the stock currently down around 2 percent in after-hours trading. While the company did exceed expectations, the biggest GAAP loss on record is obviously nothing to crow about.
Elevated Inventory: Intel’s Achilles Heel
As per the preliminary PC shipment figures for the first quarter of 2023 tabulated by the IDC, the PC market continues to suffer from weak demand and high inventory levels as the boomerang effect from the binge-shopping during the COVID-19 pandemic takes its toll. The total PC shipments during Q1 2023 are expected to have declined by a massive 29 percent on an annual basis.
As far as the product roadmap is concerned, the Sapphire Rapids datacenter-focused CPU has finally started shipping after a hefty delay. Intel now plans to roll out its fifth-generation Emerald Rapids processor in Q4 2023, followed by Sierra Forest and Granite Rapids in 2024. The semiconductor giant is betting big on data centers, expecting an annualized growth rate in the low-20-percent range for such CPUs over the next five years.
Intel is the main loser of Sapphire Rapids' lower-than-expected demand and Microsoft's significant reduction in Sapphire Rapids server orders due to weak server market demand
My latest research indicates that:
1. Intel's Sapphire Rapids is expected to start mass shipments in…— 郭明錤 (Ming-Chi Kuo) (@mingchikuo) April 24, 2023
Nonetheless, alarm bells are already ringing. For instance, the analyst Ming-Chi Kuo recently flagged the lower-than-expected demand for Sapphire Rapids CPUs, as illustrated by the fact that Microsoft – one of the major CSP customers for the chip – has revised downward its H2 2023 orders for the Sapphire Rapids CPUs by between 50 and 70 percent.
Analysts at Raymond James do expect a gradual recovery in the data center segment in the second half of 2023 when orders from China are expected to accelerate. Should this scenario materialize, it would mean that Q1 2023 would end up constituting a rock bottom for the semiconductor giant, given the tailwind from the Sapphire Rapids in Q2.
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