Intel's Revenue Plummets 30% Causing Earnings Shock... Red Flags Continue This Year

Q4 Earnings Announcement After Market Close

[Asia Economy Reporter Yujin Cho] Intel, the largest semiconductor manufacturer in the United States, reported earnings shock-level results due to reduced demand caused by the global economic recession.

On the 26th (local time), Intel announced after market close that its revenue for the fourth quarter of last year was $14 billion (approximately 17.3 trillion KRW). This represents a 32% decrease compared to the same period last year and fell short of Wall Street's expected $14.49 billion.

It recorded a net loss per share of $0.16, turning from a net profit of $0.10 per share in the same period last year. The adjusted net loss per share was $0.10, significantly below the $1.15 in the same period last year and also below Wall Street's estimate of $0.20.

For the entire last year, revenue also plunged 20% to $63.1 billion, and earnings per share were $1.94.

The Wall Street Journal (WSJ) analyzed that this poor performance stemmed from a sharp decline in personal computer (PC) sales as the COVID-19 special demand ended. According to research firm Gartner, PC shipments during this period decreased by 28.5% compared to the same period last year.

In particular, Intel's largest revenue source, the CPU business segment, saw revenue drop 36% year-over-year to $6.6 billion.

WSJ analyzed that the ongoing global economic recession caused by inflation and high interest rates worldwide led to a sharp decline in semiconductor demand and intensified competition, delivering a direct blow to earnings. Given this performance in the fourth quarter, which is the peak season for the home appliance industry, there are also evaluations that the semiconductor industry's downturn is deepening.

[Image source=Reuters Yonhap News]

Intel expects the weak performance trend to continue this year as well. The company projected first-quarter revenue to be between $10.5 billion and $11.5 billion, significantly below Wall Street's estimate of $13.9 billion. The company also expects a net loss per share of $0.15 in the first quarter, while the market anticipated a profit of $0.24 per share.

Pat Gelsinger, Intel's CEO, announced plans to reduce $3 billion in sales and operating expenses this year and cut up to $10 billion in costs by the end of 2025. He explained that the restructuring efforts undertaken to respond to deteriorating earnings due to reduced demand and recession concerns have somewhat gotten on track.

Despite worsening earnings and cost-cutting measures, Intel is continuing an unprecedented move to accelerate facility expansion. Based on the benefits of the multibillion-dollar semiconductor support law, it is pushing forward with new factory construction in Arizona and Ohio in the U.S., as well as in Magdeburg in eastern Germany.

Due to prolonged global supply chain disruptions caused by the pandemic and Russia's invasion of Ukraine, Germany and the European Union (EU) are promoting revitalization of manufacturing within Europe, and foreign media predict that new factory expansions may extend to other regions as well.

Meanwhile, Intel's stock price, listed on the U.S. Nasdaq market, plunged more than 9% in after-hours trading on the day due to disappointment over the earnings results.