Intel revenue drops again; company to speed up next-gen chips
Dogged by stalled PC sales and tighter IT spending, Intel once again reported down revenues. CEO Pat Gelsinger highlighted progress and plans to remedy the issue.
For the fourth consecutive quarter, Intel's revenue spiraled down as sagging PC sales, mounting competitive pressures and tightening IT budgets continue to weigh on the company's financial performance.
Intel's fourth-quarter revenue plummeted 32%, to $14.04 billion. The company reported a $664 million net loss, compared with a profit of $4.62 billion in the year-ago quarter. Revenue for all of fiscal 2022 dropped 20%, to $63.3 billion from the $79 billion reported in 2021.
The bad news doesn't stop there. The company said it expects first quarter revenues to be in the range of $10.5 to $11.5 billion -- below analysts' expectation of more than $13 billion. Intel declined to provide a full-year forecast because of "the uncertainty in the current macro environment," said CEO Pat Gelsinger during the company's quarterly call.
"Clearly the financials aren't what we would hope for," Gelsinger said. "But we're also pleased with the execution progress we've made. We're confident in the strategic outlook we have for the business. We're laser-focused on controlling the things we can such as every aspect of our execution and cost management."
Analysts expected another down quarter, but perhaps not as bad as this quarter turned out to be. Much of the company's poor performance can be laid at the feet of upper management that preceded Gelsinger, according to one analyst. Gelsinger took over as CEO in February 2021.
"Before Gelsinger arrived, Intel was very complacent, thinking what they had was good enough," said Jack Gold, principal analyst at J. Gold Associates LLC. "But AMD gave them a good kick in the pants with their PCs and Nvidia did the same with AI and graphics chips."
What Intel needs to do is to keep putting out new chips that people want to buy; that's fundamentally the bottom line.
Jack GoldPrincipal analyst, J. Gold Associates
Like many turnarounds of the past in the chip market, it may take Intel a few years to regain its momentum, Gold said. His advice for recovery is straightforward.
"What Intel needs to do is keep putting out new chips that people want to buy; that's fundamentally the bottom line," he said. "The problem they face is it routinely takes all semiconductor companies two to three years from start to finish to get a chip to market."
Intel's chip plans
Whether or not Intel's latest chips appeal to users during the next 12 to 18 months remains to be seen. But if they don't, it won't be for a lack of trying.
Given the mounting pressures, Intel is preparing an aggressive roadmap with plans to ramp up its Sapphire Rapids server chip. It int to follow up that offering later this year with Emerald Rapids, a 64-core server processor aimed at large datacenters. That will be followed up in 2024 by Granite Rapids, featuring up to 12 DDR5 memory channels, and Sierra Forest, which will compete directly against AMD's EPYC server chip.
Intel's chip technology lags behind rivals AMD and Taiwan Semiconductor Manufacturing Co., which have faster CPUs and GPUs. One analyst gives Intel a chance to close the competitive gap with its rivals -- though its margin of error is growing increasingly narrow.
"Intel needs to lean into its strengths in process and manufacturing," said Dan Newman, principal analyst at Futurum Research and CEO of Broadsuite Media Group. "It needs to avoid any missteps, with no excuses offered. It also needs to show momentum with its foundry business, which is a rich opportunity for revenue generation."
Plans remain on track to fully develop its foundry business. Intel is actively engaged with seven of its top 10 largest foundry customers and has 43 potential customers and ecosystem partners lined up, Gelsinger said.
"More importantly, we continue to push forward with the next phase of our IDM [Integrated Device Manufacturing] 2.0, which is key to creating an internal foundry that will combine our systems business practices and culture resulting in a more effective cost-savings structure," Gelsinger said.
He added that the company has identified nine separate subcategories for operational improvements. In total, this initiative will provide better transparency to the company's financial execution and also allow the company to better benchmark its foundries against those of competing foundries.
"Ultimately, these cost-saving initiatives allow users to better judge how we are allocating our capital and how much value we are creating," Gelsinger said.
As Editor At Large with TechTarget Editorial's News Group, Ed Scannell is responsible for writing and reporting breaking news, news analysis and features focused on technology issues and trends affecting corporate IT professionals.
