Intel raises full-year sales forecast, but supply constraint woes send shares down

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Yahoo Finance 22 July, 2021 - 03:13pm 20 views

(Reuters) -Intel Corp raised its annual revenue forecast above Wall Street expectations on Thursday, but Chief Executive Pat Gelsinger said the outlook for the chipmaker was still "supply constrained" and that it could take the industry two more years to catch up with rising chip demand.

Paired with a third-quarter sales forecast that just cleared analyst estimates, the results sent shares down 2.8% in after-hours trading after the results.

Intel, one of the few remaining companies in the processor chip industry that both designs and manufactures its own chips, has been able to weather the supply chain woes better than some rivals and is also working to build a business of making chips for others, called a "foundry" business.

Gelsinger declined to comment on a recent report that Intel is looking to buy GlobalFoundries for $30 billion to bolster its foundry efforts but told Reuters that he expects industry consolidation to continue and that "M&A will remain a part of our strategy" for building the company's foundry business.

Intel said it now expects annual adjusted revenue of $73.5 billion, compared with its previous forecast of $72.5 billion and analyst expectations of $72.80 billion, according to Refinitiv IBES data. Intel expects adjusted third-quarter revenue of about $18.2 billion, only modestly above estimates of $18.09 billion, according to Refinitiv data.

"I think investors simply expect more from semiconductor companies in this environment," said Logan Purk, an analyst at Edward Jones "Even though they did increase revenue guidance, it was only about a 1% increase. A bulk of the change in earnings guidance was due to a lower tax rate."

Gelsinger said Intel could sell more chips if it could make more chips. Even though the company runs its own factories, it still faces supply constraints from its own suppliers of materials and equipment.

"We are helping them build factories as fast as they can," Gelsinger told Reuters. "But it will be one of those things that just takes a couple years to fully catch up to this explosive demand we’re seeing, and we have better tools to address it than others."

But some analysts do not agree with Intel's rosy view of end demand. Citing a tame forecast this week from Texas Instruments Inc, Kinngai Chan, analyst at Summit Insights Group, disputed Gelsinger's view of the market and said Intel was likely to keep "playing defense" against rivals like AMD with better chips.

"We think the entire semiconductor supply chain will be caught up by 4Q21 as we believe there's rampant double ordering in the supply chain coupled with a moderating end-market demand," Chan said.

Angelo Zino, analyst at CFRA Research, said that Intel's stronger-than-expected second-quarter results and third-quarter forecast actually imply a shortfall in fourth-quarter sales versus previous forecasts - despite the fourth-quarter usually being one of the company's best quarters as consumers snap up laptops and PCs as holiday gifts.

Gelsinger, however, told investors on a conference call that he expects the PC market to keep growing into 2022, contradicting the predictions of some analysts.

Revenue from the company's higher-margin data center business fell 9% to $6.5 billion in the second quarter, while its personal computing business revenue rose 6%, both beating Refinitiv estimates.

On an adjusted basis, the company earned $1.28 per share in the second quarter, compared with estimates of $1.06, according to Refinitiv data.

(Reporting by Chavi Mehta in Bengaluru and Stephen Nellis in San Francisco; Editing by Shounak Dasgupta and Diane Craft)

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(Bloomberg) -- Intel Corp., the world’s biggest semiconductor maker, gave a lackluster third-quarter sales forecast, indicating its data-center chip business continues to suffer market-share losses in the face of stiffer competition.Sales in the current period will be about $18.2 billion, Intel said in a statement Thursday. That compares with average analyst projections of $18.3 billion. Adjusted gross margin, a measure of profitability, will be about 55%, the company said, and per-share profit

Chipmaker Intel easily beat Wall Street's earnings target for the second quarter. But data center sales disappointed.

Intel Corp. shares weakened in the extended session Thursday after the chip maker topped expectations, but its outlook barely surpassed the average forecast from Wall Street analysts.

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Intel falls despite positive earnings report

CNBC Television 22 July, 2021 - 05:02pm

Intel Q2 earnings and revenue beat expectations

CNBC Television 22 July, 2021 - 05:02pm

Intel teases plan to speed up chip advancements

The Verge 22 July, 2021 - 04:24pm

More news is coming on July 26th

The announcement comes alongside Intel’s Q2 earnings, where the semiconductor company managed to beat expectations and bring in $18.2 billion in revenue, up 2 percent year-over-year. Intel is feeling pretty optimistic about the future, too. It raised its 2021 outlook by an additional $1 billion to $73.5 billion, and now expects to achieve revenue growth year-over-year compared to 2020.

Intel’s earnings have been trending upwards for the past several quarters, despite its frequent delays and misses on production of both its 10nm and 7nm chips. That growth has been buoyed by spikes in demand for both personal computers and data-center chips in 2020 due to the COVID-19 pandemic, which saw millions buy new laptops and computers to aid in remote work and education and an increased reliance on cloud services.

And Intel seems to still be riding that wave, recording $10.1 billion in revenue for its client computing group (up 6 percent year over year, and a Q2 record for the company), despite the global semiconductor shortage. Gelsinger commented during the call that he “expect[s] the shortages to bottom out in the second half [of the year, but] it will take another one to two years before the industry is able to completely catch up with demand.”

The boost for the client computing group also helped Intel make up for slower revenue from its data center group, which was down 9 percent year-over-year with $6.5 billion in revenue. There’s signs that that the impressive growth for the PC segment is starting to slow, however: both IDC and Gartner noted that growth of PC sales has slowed down considerably in Q2, which could indicate that the boost in sales there will diminish in the coming months.

The past year has been a tumultuous one for Intel. Last summer, the company was forced to admit that it would be severely delaying its upcoming 7nm architecture for its next generation of processors. That news was followed by the departure of the company’s hardware chief, Dr. Venkata (Murthy) Renduchintala, and the replacement of CEO Bob Swan with Pat Gelsinger (a former chief technology office and hardware engineer at the company) in an attempt to right the ship.

Gelsinger has wasted no time in trying to establish changes to get Intel back on track, announcing a new “IDM 2.0” initiative in March that aims to see Intel return as an industry leader in chip manufacturing. As part of that plan, the company will be outsourcing production for “products at the core of Intel’s computing offerings” to competitors like TSMC and Samsung starting in 2023.

Intel is also working to launch a new branch of its business, Intel Foundry Services, which will see the company take on manufacturing projects for third-party companies, including a $20 billion investment in expanding its manufacturing facilities in Arizona.

Given the overwhelming demand for more chip making companies in light of the global semiconductor shortage, Intel Foundry Services could be a big win for the company down the line. Intel announced today that it has over 100 potential customers interested in the service, and promised more news on Monday about the new initiative, but it’ll still be some time before that business ramps up.

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Intel's Q2 2021: PCs up 33 Percent, Servers Continue Decline

Tom's Hardware 22 July, 2021 - 04:22pm

Intel says it will ship several million Alder Lake chips to its partners in the second half of this year, and that it has already shipped 50 million Tiger Lake chips into the market. However, the company also warned that it would see 'particularly acute' chip shortages for desktop PCs in the third quarter. Intel remains bullish amid these challenges, though, as it raised its full-year outlook by $1 billion to $73.5B. 

Intel's desktop PC volumes were up 15% for the year, while notebooks jumped an incredible 40% year-over-year (YoY). Those gains came at the expense of price cuts, though, as Intel's average selling prices (ASPs) declined 5% and 17% for desktops and notebooks, respectively, indicating that Intel is reducing pricing to stay competitive with AMD. 

Intel also announced that it now fabs more 10nm wafers than 14nm, and that it has reduced 10nm manufacturing costs by 45% year-over-year.

Intel's Data Center Group (DCG) chugged along with $6.5 billion in revenue during the quarter, down 9% the year prior. Intel cited a challenging compare to the prior year and a more competitive environment for the downturn, a nod to AMD's potent EPYC processors that continue to nibble away market share. Intel's lower sales in the server segment came in the wake of its prior quarter, which saw a 20% YoY revenue decline

New Intel CEO Pat Gelsinger continues to restructure the company as he replaces and reinvigorates key leadership roles and begins to develop the company's IDM 2.0 initiative, which will find the company fabbing chips for other firms through a new Intel Foundry Services (IFS). Gelsinger announced that Intel recently signed its first cloud customer for its IFS chip packaging services and has 100 potential customers for its planned chip-fabbing services.

Intel will present roadmaps and an update on its process and packaging technologies during its Intel Accelerated Webcast on July 26 at 2pm PT. The event will be streamed via the Intel Newsroom, and we'll also have our own coverage of the event with additional analysis.

Paul Alcorn is the Deputy Managing Editor for Tom's Hardware US. He writes news and reviews on CPUs, storage and enterprise hardware.

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Intel CEO: We’re talking to 100 potential customers for manufacturing services

VentureBeat 22 July, 2021 - 04:21pm

Intel CEO Pat Gelsinger said the company is talking to 100 potential customers for its Intel Foundry Services (IFS), where the company uses its factories to make chips for others.

He said the company will have more to say about IFS customers on Monday. Gelsinger joined as CEO earlier this year and pledged to get Intel to regain its leadership in manufacturing. On top of that, he said Intel would invest in its foundry business, where it serves as a contract manufacturer for companies that design their own chips.

Intel is rumored to be talking to GlobalFoundries about acquiring the foundry company for $30 billion. Gelsinger declined to comment on that.

“At this say we would not say that M&A is critical, but nor would we rule it out,” he said.

Above: Pat Gelsinger is CEO of Intel

Gelsinger made the comments as part of the company’s second quarter earnings call with analysts. Intel reported Q2 earnings and revenues above expectations, and it raised its estimates for 2021 revenues and profits.  Just about all chip companies are expanding now to meet that demand, and Intel recently said it would spend $20 billion on new manufacturing in Arizona.

Gelsinger said it was the most exciting time to be in the semiconductor industry, as demand is at record levels. He said Intel has shipped more than 50 million Tiger Lake processors, and it is ramping its Ice Lake chips and is finishing the design of its Meteor Lake chips.

“While there is more work ahead, we are moving at a torrid pace,” Gelsinger said.

On Monday, he said Intel will talk about its plans to regain leadership in processor design (from rival Advanced Micro Devices). Intel expects capital spending to be $19 billion to $20 billion this year. It is exiting its Apple and home gateway business. Intel, meanwhile, needs more manufacturing capacity for its own chips.

“The world needs more semiconductors,” Gelsinger said. “The world needs a more balanced semiconductor supply chain.”

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Intel’s Sales Forecast Falls Short as Data Center Unit Sags

Yahoo Finance 22 July, 2021 - 04:15pm

Sales in the current period will be about $18.2 billion, Intel said in a statement Thursday. That compares with average analyst projections of $18.3 billion. Adjusted gross margin, a measure of profitability, will be about 55%, the company said, and per-share profit is forecast to be $1.10.

While demand for Intel’s lucrative server chips improved in the second quarter from the prior period, investors focused on the 9% decline in the division’s sales as a sign that a recovery isn’t yet taking hold. Intel’s Xeon chips, some of which sell for as much as a compact car, are increasingly competing with souped-up offerings from Advanced Micro Devices Inc. and from the internal efforts of major cloud-computing customers, such as Amazon.com Inc.’s AWS and Alphabet Inc.’s Google, to supply their own components.

Chief Executive Officer Pat Gelsinger said Intel’s data-center business will return to strong growth in the second half. Gelsinger, who took the helm in February, has pledged to regain Intel’s technological leadership in the semiconductor industry, and plans to spend heavily to expand its reach in manufacturing to pose a stronger challenge to Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.

The company’s shares slipped about 2.8% in extended trading following the announcement. They’d earlier closed at $55.96 in New York, leaving them up 12% this year.Santa Clara, California-based Intel said second-quarter profit, excluding certain items, was $5.2 billion, or $1.28 a share. Sales climbed 2% to $18.5 billion. On average, analysts had predicted earnings of $1.07 per share on revenue of $17.8 billion.

The company’s PC chip business slightly topped estimates in the second quarter, helping counter concern that demand for notebooks would drop as pandemic-related lockdowns bring an end to working and studying from home. In an interview Thursday, Gelsinger also predicted that the PC market will continue to expand into 2022. For the year, Intel said adjusted sales will be about $73.5 billion, ahead of predictions.

In the first quarter, Intel’s server chip revenue plummeted 20%. At the time, executives explained that it was a temporary phenomenon caused by its biggest customers working their way through stockpiles of unused chips. Analysts expressed concern that some of that drop-off was market share loss to AMD and large customers’ internal chip design efforts using outsourced production. AMD subsequently reported strong growth in its server chip business, adding to evidence of market share gains against Intel.Gelsinger’s predecessors left him with a company that had fallen behind TSMC and Samsung in chipmaking technology. Loss of dominance in that crucial area has made Intel more vulnerable to competition than it has been in a decade. The board brought back Gelsinger, who started his career at Intel as teenager and worked his way up through its engineering ranks, to fix that. Since taking over, he has said Intel will fight hard for every order in a tougher environment and boost spending on creating a new unit that allows customers, and even competitors, to use its factories to manufacture their own designs.

Intel Falls on Latest Server Chip Delay; Rival AMD Gains

His sense of urgency is warranted. In 2019 Intel’s revenue was double that of TSMC. By 2023 they will be about the same size, according to analysts’ estimates. At that point both might be looking up at Samsung’s chip unit revenue, based on projections.Of the three, Intel is the only one that is estimated to report lower revenue in 2021 than it did last year.

Intel’s products haven’t been central to the shortages currently holding back production of everything from pickup trucks to game consoles. The company, whose in-house production facilities build the majority of the chips it sells, had increased factory capacity prior to the spike in demand for laptops that began last year.

The company’s reliance on its own plants is both a strength and a weakness. In the past year, many automotive companies and electronics makers have struggled to get enough supply from outsourced manufacturers. But Intel’s internal production network has largely kept pace with demand for PC and server processors.

Still, Intel’s output has come from an aging production process, and the company has lagged behind its own deadlines for the introduction of new technology. That means that rival manufacturers have been able to offer chips that they say are technically superior to Intel’s.

Investors and analysts have welcomed Gelsinger’s ambitious approach, while cautioning that it will take time to deliver results, and in the meantime could dent the company’s profitability. Intel said its adjusted gross margin, or the percentage of revenue remaining after deducting the cost of production, will be 56.5% this year. For the third quarter, that measure will be 55%, narrower than analysts estimated.

(Updates with details from report, comments from CEO starting in third paragraph.)

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Chipmaker Intel easily beat Wall Street's earnings target for the second quarter. But data center sales disappointed.

Intel Corp. shares weakened in the extended session Thursday after the chip maker topped expectations, but its outlook barely surpassed the average forecast from Wall Street analysts.

(Reuters) -Intel Corp raised its annual revenue forecast above Wall Street expectations on Thursday, but Chief Executive Pat Gelsinger said the outlook for the chipmaker was still "supply constrained" and that it could take the industry two more years to catch up with rising chip demand. Paired with a third-quarter sales forecast that just cleared analyst estimates, the results sent shares down 2.8% in after-hours trading after the results. Intel, one of the few remaining companies in the processor chip industry that both designs and manufactures its own chips, has been able to weather the supply chain woes better than some rivals and is also working to build a business of making chips for others, called a "foundry" business.

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Intel stock declines as outlook barely clears Wall Street expectations following beat

MarketWatch 22 July, 2021 - 03:19pm

Intel reported second-quarter net income of $5.06 billion, or $1.24 a share, compared with $5.11 billion, or $1.19 a share, in the year-ago period. After adjusting for acquisition-related expenses and other items, Intel reported earnings of $1.28 a share, compared with $1.23 a share from a year ago.

Revenue declined to $19.63 billion from $19.73 billion in the year-ago quarter, for a fourth straight quarter of year-over-year revenue declines, but topped its own and analysts’ estimates. Excluding the company’s memory business, revenue was $18.5 billion. Analysts had estimated adjusted earnings of $1.07 a share on revenue of $17.81 billion, while Intel had forecast adjusted earnings of $1.05 a share on revenue of $18.9 billion, or $17.8 billion when removing the memory business it was divesting.

“Our second-quarter results show that our momentum is building, our execution is improving, and customers continue to choose us for leadership products,” said Intel Chief Executive Pat Gelsinger in a statement.

For the third quarter, Intel forecast revenue of about $19.1 billion, or $18.2 billion when removing the memory business, and GAAP earnings of $1.08 a share and non-GAAP earnings of $1.10 a share. Analysts on average expected adjusted third-quarter earnings of $1.09 a share on revenue of $18.11 billion.

Read: The chip crunch marches on, but one sector could be in store for relief

Intel’s data-center group revenue declined 9% to $6.5 billion, while analysts surveyed by FactSet expected $5.84 billion.

Intel’s largest segment — client-computing, the traditional PC group — rose 6% to $10.1 billion, with analysts expecting $10.03 billion.

Intel reported that nonvolatile memory-solutions revenue fell 34% to $1.1 billion, while Wall Street expected $690.8 million, and “Internet of Things,” or IoT, revenue rose 47% to $984 million, compared with an expected $901.5 million. Mobileye revenue soared 124% to $327 million, but the Street had expected $361.4 million.

Read: Why chip stocks are falling despite semiconductor shortage, strong early earnings

AT&T Inc. topped expectations with its latest financial results as the telecommunications giant continued to see low customer churn in its wireless business as well as subscriber growth for the HBO Max service.

Wallace Witkowski came to MarketWatch from the Associated Press in New York, where he was a business reporter specializing in pharmaceutical companies. He previously reported for trade publications in covering the drug and medical-device industries back to 1998. Based in San Francisco, his focus is on U.S. equities. Follow Wally on Twitter at: @wmwitkowski.

Intel beats, but guides to lower margins for Q3

CNBC 22 July, 2021 - 03:08pm

Intel shares fell 2% after CEO Pat Gelsinger's second earnings report at the helm of the American chip giant as investors assessed cautionary guidance on margins in the current quarter.

Intel reported revenue and earnings per share that beat both the company's own forecast as well as Wall Street expectations, attributing the beat to strength in its business unit that produces chips for PCs. Intel said that PC unit sales were up 33% over last year.

Here's how Intel did versus Refinitiv consensus estimates for the quarter ending in June:

Intel raised its guidance for 2021 by $1 billion to $73.5 billion in adjusted revenue and full year earnings-per-share of $4.80. Intel's results suggest that a boom in computer sales that started during the Covid-19 pandemic may continue even as people return to offices and schools.

However, Intel guided to non-GAAP gross margins of 55% in Q3, a notable drop from 59.2% in Q2. Intel said that the decreased margin was due to supply constraints as well as costs related to building chips with a new process technology. Intel has also committed to spend $20 billion to improve its manufacturing capabilities, including two new facilities in Arizona.

One highlight was Intel's Client Computing Group, which includes chips for PCs, reported $10.1 billion in revenue, up 6% year-over-year. However, the average price of a PC chip that Intel sold decreased, the company said. Intel was also grappling with a chip shortage during the quarter, Gelsinger said.

Gelsinger said that chip shortages should "bottom out" in the second half of the year, but that supply would still be be limited after that.

The company's second largest segment, chips for data centers, reported $6.5 billion in sales, which was down 9% year-over-year. The company said it was a "challenging competitive environment," suggesting that AMD's server chips may be winning customers.

Another highlight for the chip giant was Mobileye, its autonomous driving subsidiary, which reported sales up 124% on an annual basis to $327 million. While still small compared to PC and server chips, Intel hopes that it can become a major supplier for self-driving cars, and earlier this week it said it would start testing autonomous vehicles in New York City. Intel's Internet of Things group, which sells low-power embeddable chips, was up 47% annually to $984 million.

Gelsinger has announced plans for Intel to transform itself by manufacturing chips for other companies, in addition to using contracted chip factories, called foundries, to also make some of its own processors.

But Gelsinger's proposed turnaround plan has already run into roadblocks. In June, Intel delayed the release of its next-generation server processor to early 2022, suggesting that it's still having trouble keeping up with competitors. Also in June, Intel's server boss, Navin Shenoy, left the company after 26 years as part of a restructuring that also created new business units.

Intel may be considering acquisitions to accelerate Gelsinger's plan.

The company is in early-stage talks with Abu Dhabi sovereign wealth fund Mubadala to buy GlobalFoundries, a major American chip foundry, CNBC has confirmed, although no deal is assured. According to Reuters, Intel has also considered taking over SiFive, a company that develops silicon based on the open-source RISC-V technology, which is an alternative to the ARM instruction set that's currently dominant in mobile chips.

"At this point, we would not say M&A is critical, but nor would we rule it out," Gelsinger said, stating that smaller companies in the chip manufacturing business would eventually fall behind.

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