Intel surprisingly turned a profit in the past quarter, and the company expected a healthy second half of the year as inventories are gradually back to normal levels and the PC market is likely hitting the bottom.
According to Intel's latest earnings report for the second quarter ending on July 1, quarterly sales for the company fell by 15% year-on-year but rose by 8% sequentially to US$12.9 billion, marking the end of the consecutive four-quarter of quarterly decline. Bloomberg reported that Intel's latest quarterly revenue beat the projection of about US$12 billion. Meanwhile, Intel posted a surprising profit of US$1.5 billion after two consecutive quarters.
According to Intel's statement, the financial results exceeded the high end of its guidance as the company continued to executive on strategic priorities, including building momentum with the foundry business and delivering on product and process roadmaps, adding that Intel is well-positioned to capitalize on AI opportunities by championing an open ecosystem and silicon solutions that optimize performance, cost, and security to democratize AI.
David Zinsner, Intel CFO, said that the positive performance in the quarter was attributed to strong execution, which includes making strides towards achieving their US$3 billion cost savings target for 2023. David emphasized Intels' ongoing commitment to operational efficiencies and implementing their Smart Capital strategy to support sustainable growth and financial discipline as the company improved margins and cash generation and drove shareholder value.
Intel expects the revenue for the third quarter to be US$12.9-13.9 billion on a GAAP basis. The gross margin for the third quarter is anticipated to be 39.1%, with EPS expected to be US$0.04.
Sales for Intels Client Computing Group were US$6.8 billion, down 12% year-on-year, and that for the Data Center and AI fell by 5% to US$4 billion from a year ago.
Intel CEO Pat Gelsinger said at the earnings call that the client business exceeded expectations and gained share, seeing a modest recovery in the consumer and education segments, as well as strength in premium segments where Intel has leadership performance, adding that a sustained recovery in the second half of the year is expected as inventory has normalized.
According to semiconductor analyst Andrew Lu, the improvement of Intel's second-quarter revenue can be attributed to the recovering demand for PC and notebooks. Inventory days were down quarter-on-quarter but rose annually. Revenue generated by Intel Foundry Service was US$230 million, up 307% year-on-year. However, Lu said that Intel Foundry Service still operated at a loss.
Bloomberg Intelligence said that Intel's second-quarter sales, which exceeded expectations, along with their slightly improved third-quarter revenue guidance, point to an increased likelihood of the PC industry reaching its lowest point during the second quarter.
Intel's income statement (US$m) | ||||||
Financials | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | YoY for 2Q23 (%) |
Sales | 15,321 | 15,338 | 14,042 | 11,715 | 12,949 | -15 |
Gross profit | 5,587 | 6,535 | 5,500 | 4,008 | 4,638 | -17 |
Operating income | -700 | -175 | -1,132 | -1,468 | -1,016 | |
Net income | -454 | 1,019 | -664 | -2,758 | 1,481 | |
Source: Intel, July 2023
Intel's sales by business unit (US$m) | ||
Business unit | 2Q23 | YoY for 2Q23 (%) |
Client Computing | 6,800 | -12 |
Datacenter & AI | 4,000 | -15 |
Network & Edge | 1,400 | -38 |
Mobileye | 454 | -1 |
IFS | 232 | 307 |
Source: Intel, July 2023
