Intel Projects Lower Sales Than Anticipated, Seeks More Streamlining
Intel Revenue Outlook Dents Wall Street Expectations
After announcing a revenue outlook of $11.2 to $12.4 billion for the second quarter, Intel, the California-based chipmaker, saw its stock drop by over 7% in after-hours trading on Thursday. This figure falls short of the average analyst expectation of $12.82 billion.
Intel's Chief Financial Officer, David Zinsner, attributed the fluctuations in the industry to increased uncertainty resulting from the current macroeconomic environment. In the first quarter, revenues remained stagnant at $12.67 billion, missing expert estimates of $12.3 billion.
The tech giant faces stiff competition, particularly in PC and server processors from AMD. In high-performance chips for Artificial Intelligence (AI), Nvidia is the dominant market leader. Intel has yet to introduce a competitive product in this segment, as the development of the "Falcon Shores" AI chip has been temporarily suspended by new CEO Lip-Bu Tan for internal testing purposes only.
Intel has announced plans to streamline its operations and reduce costs. The company aims to cut planned operational expenses from $17.5 billion to around $17 billion in 2025, and to $16 billion in 2026. The restructuring endeavors may result in uncertainty concerning job numbers. Tan has previously signaled job cuts following the elimination of leadership positions.
The once-dominant semiconductor manufacturer is grappling with weak mixes and declining gross margins, which has led to a forecast of a gross margin of 36.5% for the second quarter. The primary driver for the decline is a weak performance in the Desktop market segment and ongoing restructuring.
Intel's strategic challenges lie in the need to balance manufacturing and design operations, a challenge that is increasingly unsustainable as competitors outsource manufacturing and focus more on innovation. The persistent gap between analyst expectations and Intel’s reported results continues to erode investor confidence, fuelling debates about Intel’s ability to recover and regain market share.
In light of the industry's volatility, specifically in the finance sector due to the current economic uncertainties, Intel's Chief Financial Officer, David Zinsner, addressed the factors affecting the technology sector's growth. The ongoing competition in PC and server processors from AMD, combined with a lack of competitive products in the high-performance Artificial Intelligence chips market dominated by Nvidia, has posed significant challenges for the finance department of the tech giant, Intel.
