Intel shares slump 8% after weak earnings show waning demand

Intel stock closed 8% lower Friday, a day after the company reported disappointing second-quarter earnings, which missed top and bottom earnings.

Intel’s revenue is down 22% year over year and losing the consensus 14%, the company’s biggest disappointment since 1999, according to Refinitiv data. It ended the quarter with a net loss of $454 million, compared to net income of $5 billion in the prior year quarter.

The company also lowered its full-year forecast. Intel said it now expects full-year adjusted earnings of $2.30 per share and revenue of $65 billion to $68 billion, down from guidance three months ago.

David Zinsner, Intel’s chief financial officer, told CNBC in an interview that the updated forecast factors in economic weakness could cause organizations to postpone PC upgrade cycles. He said that small and medium-sized businesses have been slow to buy computers, but the company has remained resilient.

“We think we’re at the bottom,” Zinsner said.

Pat Gelsinger, CEO of Intel Corporation, holds a semiconductor chip while testifying during a Senate Commerce, Science and Transportation hearing entitled Developing Next-Generation Technology for Innovation, at the Russell Senate Office Building on Wednesday, March 23, 2022.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Analysts from Susquehanna lowered Intel’s stock rating from neutral to negative and said that while they liked to believe this was a one-time reset, problems remained.

“For decades, Intel has been able to cover up a series of failed projects, poor acquisitions, and strategic points by pushing Moore’s Law and driving operations,” the analysts wrote in a Friday report. “Unless they regain that leadership (we think it’s unlikely), or change strategic direction, we expect Intel’s growth, profitability and cash flow problems to continue.”

Bird analysts also downgraded Intel, citing concerns about supply chain delays and shifts in consumer patterns in the wake of the pandemic.

“We are increasingly concerned that more than 20 days of inventory in the PC supply chain could take quarters to unfold, given what we believe are structural changes in consumer PC consumption patterns, combined with a seasonally weak first half that will continue to Pressure on the use of Intel “rates and gross margin recovery” said in a report on Friday.

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