As lockdowns continue in China, supply chain bottlenecks are likely to hurt Intel’s customers and, in turn, impact the chipmaker’s business.
As lockdowns continue in China, supply chain bottlenecks are likely to hurt Intel’s customers and, in turn, impact the chipmaker’s business.
Chipmaker Intel Corp on Thursday forecast second-quarter sales and profit below Wall Street expectations on concerns of weak demand in its largest end-market, PCs, and heightened supply chain uncertainty due to COVID-19 lockdowns made in China.
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The company’s shares fell 5% in after-hours trading.
Rising inflation, the resurgence of COVID-19 in China, and uncertainties surrounding the war in Ukraine have shifted consumer spending away from gadgets, hurting Intel. More than half of the turnover last year came from the segment in which processors for personal computers were sold.
“We expect Shanghai to open fairly soon, but that dampens our second-quarter outlook a bit,” Intel CEO Pat Gelsinger told Reuters. “It doesn’t change the perspective on the year we think you’ll have more PC demand in the second half.”
The Beats in the first quarter are helping Intel meet its full-year revenue guidance, he added.
As lockdowns continue in China, supply chain bottlenecks are likely to hurt Intel’s customers and, in turn, impact the chipmaker’s business.
“We believe Intel has yet to prove it can meet the guidance targets before the stock gets full credit for a strong guide,” said Logan Purk, an analyst at Edward Jones.
Analysts say the PC market has veered off scorching growth rates over the past two years as remote working and learning has fueled high demand during the pandemic.
Revenue for Intel’s Client Computing Group, which supplies PC manufacturers and is the largest contributor to the company’s revenue, fell 13% to $9.3 billion in the first quarter.
The company expects adjusted earnings of 70 cents per share on sales of about $18 billion for the current quarter, below analysts’ median estimate of 83 cents per share of $18.38 billion, the company said IBES data from Refinitiv.
Intel is also facing increasing competition in the data center space as rivals Nvidia Corp and Advanced Micro Devices ramp up chip production to serve the booming market amid growth in Metaverse, AI applications, and cloud computing.
Revenue from Intel’s higher-margin data center and AI business grew 22% to $6 billion in the quarter, compared to a median estimate of $6.77 billion that analysts had expected.
However, adjusted revenue for the first quarter was $18.4 billion, compared to analysts’ median estimate of $18.31 billion.
On an adjusted basis, Intel earned 87 cents per share, ahead of expectations of 81 cents.
