‘We must do better’ says Gelsinger on Intel’s latest results

Intel has posted a 22% decline in revenue for its second quarter of 2022, compared with last year. Its net income declined by 109%, representing a loss of $500m on revenue of $15.3bn.

Of the three major areas of the chipmaker’s business, client computing reported revenue of $7.7bn, 25% less than last year; the datacentre and artificial intelligence (AI) group posted revenue of $4.6bn, representing a decline of 16%, and only the networking and edge group saw positive growth with revenue of $2.3bn – 11% up on the same quarter in 2021.

Of the company’s smaller divisions, MobileEye grew its business by 41% with revenue of $460m, while Intel Foundry Services experienced a 54% decline with revenue of $122m. The firm’s Accelerated Computing Systems and Graphics Group (AXG) reported modest growth of 5%.

“This quarter’s results were below the standards we have set for the company and our shareholders,” said Pat Gelsinger, Intel CEO. “We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues. We are being responsive to changing business conditions, working closely with our customers while remaining laser-focused on our strategy and long-term opportunities. We are embracing this challenging environment to accelerate our transformation.”

In prepared comments for the Q2 results, Gelsinger also discussed how the company was sharpening its focus in the second quarter by selling its drone business and winding down its efforts in Optane as it shifts to CXL technology. “These add to actions last year in NAND and the sale of McAfee,” he said. “In total, we have now exited six business since my return, providing roughly $1.5bn for investments aligned with our IDM2.0 strategy.

“We are also lowering core expenses in calendar year 2022 and will look to take additional actions in the second half of the year. Importantly, expense discipline is not impacting the strategy, and we remain firmly on track to achieve process performance parity in 2024 and unquestioned leadership in 2025. This goal is our true North Star.”

Intel CFO Dave Zinsner said: “Due to the difficult macroeconomic environment, together with our own execution challenges, our results for the quarter were well below expectations and necessitate a significant revision to our full-year financial guidance. That said, we are taking the actions necessary to maintain our prior full-year adjusted free cashflow guidance, including a slowdown in hiring, capex reductions and the expectation for increased capital offsets consistent with our smart capital strategy.

“We remain fully committed to the business strategy and long-term financial model presented during this year’s investor meeting in February.”

Zinsner said Intel has seen the total addressable market of the PC market decrease by about 10% year on year due to the softening macroeconomic environment and inflationary pressures. In the datacentre and AI space, he forecast that growth would remain muted. This is due to a number of effects, including a reduction in inventory from server equipment manufacturer.