Intel posted some pretty dismal financial results for the fourth quarter of 2022. The company’s revenue for the quarter fell both sequentially and year-over-year. While the company remained profitable in 2022, it said it will lose even more in the current quarter as customers aggressively destock. In the next quarter, Intel expects an even bigger decline in sales.
The company’s revenue for the fourth quarter of fiscal year 2022 fell to $14 billion, which is 32% less than the result of the same period a year earlier. The company’s gross margin fell to 39.2% from 53.6% in the fourth quarter of 2021. This is the lowest gross margin Intel has posted in years, if not decades. In addition, the company lost $664 million for the quarter, which is almost its biggest quarterly loss ever – only slightly less than $687 million in the same quarter of 2017.
The results for the whole year do not look good either: Intel’s revenue in 2022 was $63.1 billion – 20% less than a year ago. Gross profit fell to 42.6%, while revenue fell to $7.6 billion, 65% of what it managed to earn in the year-ago period.
The company acknowledges the disappointing results, but insists on working to achieve its strategic goals despite the huge challenges. The company says it had to adjust operating costs, revise its roadmap and cut staff.
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“Despite economic and market headwinds, we have continued to make significant progress in our strategic transformation,” said Pat Gelsinger, chief executive of Intel. “In 2023, we will continue to solve short-term tasks, striving to fulfill our long-term obligations as well.”
Intel Client Computing Group is relatively more profitable, but it earned just $6.6 billion last quarter, compared to $10.3 billion in the same period a year earlier. However, with an operating margin of 11%, the division brought Intel about $700 million in net profit.
Intel blamed the decline in revenue on weak demand for PCs from mainstream consumers and educational institutions, as well as a sell-off of existing PC OEM inventory. In addition, Intel noted that products made on the Intel 7 process (aka 10-nm Enhanced SuperFin) are relatively expensive to manufacture, which affects the profitability of their production.
Regarding groups of data processing centers and artificial intelligence, its revenue fell to $4.3 billion from $6.4 billion a year earlier. This difference was mainly due to the loss of profit, which fell to $0.4 billion from $2.4 billion in the fourth quarter of last year.
The reason for the drop in profitability is weak demand for servers and competitive pressure from AMD. Given that Intel had to delay the release of Xeon Scalable Sapphire Rapids processors for more than a year, the migration of the market to AMD products is not surprising. It’s also notable that Intel’s data center business is almost half as profitable as its client PC business, which sells lower-margin products.
Intel Accelerated Computing Systems and Graphics Group (AXG) lost $441 million on revenue of $245 million, which is 1% more than last year. Last year, Intel finally released discrete Arc graphics cards, which did not greatly increase the division’s profitability.
It is interesting that the band Intel Network and Edge Group (NEX) maintained revenue of $2.1 billion (unchanged year-over-year), but its profitability declined from $352 million in Q4 2021 to $58 million in Q4 2022.
Regarding Intel Foundry Services, the company’s turnover increased by 30% to $319 million compared to the same period last year. However, according to Intel, the manufacturing company still has an operating loss of $31 million as it needs funds to support strategic growth.
MobileEye from Intel — another business that has shown steady year-over-year growth despite economic turmoil. The company’s revenue was $565 million thanks to the EyeQ and SuperVision lines, which is a 59% increase compared to the same period a year earlier. In addition, it also made $210 million in net income compared to $123 million a year earlier.
Intel did not provide any earnings guidance for the full year. At the same time, the company expects that its revenue in the first quarter of fiscal year 2023 will be from $10.5 billion to $11.5 billion, the fourth quarter of 2022. In addition, Intel predicts a 34.1% drop in gross profit.
Such expectations can be explained by aggressive inventory adjustments by PC OEMs and server manufacturers, which Intel forecasts will take place in the first quarter of 2023. Meanwhile, it also means Intel doesn’t expect an immediate impact on earnings from recent product launches (mobile Raptor Lake, Sapphire Rapids, Ponte Vecchio).
AMD posts 68% year-over-year revenue growth, but shares lose – growth expected to slow due to Intel efforts and market conditions
Source: Tom’s Hardware
