- Intel, the world’s largest integrated circuit maker, suffered its biggest quarterly loss ever in the first quarter of 2023, reaching $2.76 billion.
- Revenue plummeted 36% to $11.7 billion, the worst sales figure in more than a decade, and demand for chips from data centers punished its revenue.
- The company has launched a turnaround plan that includes manufacturing more microprocessors in-house and has made millions in industrial investments. Intel’s shares are valued at 30 dollars.
Intel’s cold numbers speak for themselves: this is the biggest quarterly loss in the company’s history.
The world’s largest integrated circuit manufacturer reported to the US Securities and Exchange Commission that it suffered losses amounting to 2.76 billion dollars (2.5 billion euros) in the first three months of the year.
These numbers compare with 8.11 billion dollars in the first quarter of last year, only these had been profits.
However, Intel CEO Pat Gelsinger says these are “solid results.” who do we believe?
Let’s see. The drop in the tech company’s bottom line starts at the top line, where revenue plummeted 36 percent to $11.7 billion, the worst sales figure in more than a decade.
From there the decline spreads across all sectors: gross margin fell from 50 percent to 35 percent, operating margin went negative, and the negative figures continue to the bottom line.
Microprocessor sales grew exponentially during the pandemic thanks to the growth in computer sales due to quarantine and home office.
Then, with the return to normalcy, individuals and businesses invested less in computers and needed fewer of the company’s microprocessors.
Sales of microprocessors for notebook computers plunged mainly, by more than 42 percent, but also for PCs, by another 30 percent.
In addition, demand for chips from data centers punished Intel’s revenues.
Intel: history of solidity and future, right?
On the other hand, the company was unable to stand up to Nvidia in the area of powerful microprocessors used in artificial intelligences, while losing market share in the area of lower-capacity microprocessors to competitors such as AMD.
The company’s executives were positive in the face of the poor results obtained.
“We have achieved solid results in these first three months, which is continued progress in our transformation,” stated, as we advanced earlier, Gelsinger.
David Zinsner, the company’s CFO, added: “We exceeded our first-quarter forecasts, both in earnings and results, and we continue to be organized in the area of expense management, in line with our commitment to increasing efficiency and cost savings.”
However, the company estimates a loss for the next quarter similar to the one ended in March, according to figures it filed with the U.S. Securities and Exchange Commission.
So far, the biggest quarterly losses were the $688 million in the last quarter of 2007.
According to the company’s estimates, sales will barely rise during the next three months, reaching between 11.5 and 12.5 billion dollars.
The company launched a modification plan that includes the in-house manufacture of a larger number of microprocessors and embarked on millionaire industrial investments, taking advantage of the economic incentives promoted by US President Biden.
In this scenario, the stock may be at a good entry point. As of this Friday, May 5, the unit value of each Intel stock is valued at $30, well below the $63.90 it reached in February 2021 and December 2019.
Intel and its possibilities
Before investing in Intel, a bit of history is in order. Intel Corporation, founded in 1968, is headquartered in Santa Clara, California. It is a multinational corporation that designs and manufactures microprocessors, chipsets, memory chips and other semiconductor-based products.
The company’s products are used in personal computers, servers, mobile devices and other computing applications. This entire market continues to grow rapidly, so it is expected that Intel’s stock will continue to follow the momentum.
Intel competes in several markets and its main competitors are Advanced Micro Devices (AMD), Nvidia and Qualcomm.
AMD is a leading microprocessor manufacturer and its products are used in personal computers and servers.
Nvidia produces graphics processing units (GPUs) and system-on-a-chip (SoC) products used in gaming, data centers and automotive applications. Qualcomm, meanwhile, is an expert in processors and modem chips used in smartphones and other mobile devices.
Intel’s growth opportunities
Intel’s main growth possibility is in the data center market, where it supplies processors and other components for use in cloud computing, artificial intelligence and other applications.
Intel is also focusing on the Internet of Things (IoT) market, where its processors and other components are used in smart and other connected devices.
In addition, the company is expanding into the automotive industry, where it supplies chips and software for autonomous driving and other applications (another good market for Intel is EVs).
Sales and market share
According to Statista, in its last few years Intel averaged revenues of more than $77 billion. Most of its revenues came from the data center market.
The company’s revenues have been growing at a steady pace in recent years and are expected to continue to grow in the coming years. This is good news and is in line with the idea that $30 is a good entry point.
According to an IDC report, Intel’s market share of the worldwide server microprocessor market is 90.3 percent, followed by AMD with 9.7 percent. However, AMD has been gaining market share in recent years and is expected to continue to do so in the future.
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