Wall Street expects a year-over-year decline in earnings on lower revenues when Intel reports results for the quarter ended March 2023. Preliminary PC shipment figures for the first-quarter from IDC paint a bleak picture for Intel Corporation’s upcoming earnings release.
Intel Corporation is slated to release its earnings after the market closes on Thursday, April 27th.
This chipmaker is expected to post quarterly loss of $0.149 per share in its upcoming report, which represents a year-over-year change of -117.1%.
Revenues are expected to be $11.124 billion, down 39.5% from the year-ago quarter.
Latest Results
Revenue in the fourth quarter fell 32% to $14 billion. Analysts on average expected revenue of $14.46 billion.
Intel expects profit margins to fall further after dropping from 58.4% in the fourth quarter of 2020 to 39.2% in the fourth quarter of 2022.
Q1 Outlook
The company forecast first-quarter revenue in the range of about $10.5 billion to $11.5 billion.
The company expects an adjusted loss of 15 cents per share versus expectations of a 24 cents per share profit.
"We expect some of the largest inventory corrections literally that we've ever seen in the industry taking place that's affecting the Q1 guide in a meaningful way," Intel Chief Executive Pat Gelsinger said.
Intel May feel More Pain on Weak PC Shipments
A recent IDC report highlighted that conditions in the PC market have not improved in Q1 2023. As a result, Intel Corporation is likely going to report weak Q1 2023 earnings later this month. The EPS revision trend is already very negative.
Slowing demand has led to weaker end-market prices, resulted in higher device inventories as well as lower volume shipments, a trend that really accelerated in the second half of FY 2022. There seems to be no indication yet, however, that this trend is easing: according to the report from IDC, preliminary PC shipments for the first quarter indicate that the PC market overall remains in a very weak condition. As a major chipmaker, Intel will likely have experienced the full force of this downturn in Q1 2023.
Total PC shipments in the first quarter declined a massive 29.0% compared to the same quarter in the year-earlier period. In the fourth quarter, also according to the IDC, worldwide PC shipments declined 28.1% year over year, so operating conditions in Q1’23 slightly deteriorated compared against an already very weak fourth quarter.
The continual downturn in the PC market does not bode well for Intel’s core operating performance, especially in the Client Computing Group. This segment is responsible for about 50% of consolidated revenues, and Intel is likely to disappoint mightily when it reports earnings later this month.
Additionally, the continual weakness of the PC market may result in Intel suspending its dividend altogether which may result in a retest of Intel's lows.
Analysts’ Opinions
Intel price target raised to $32 from $25.50 at Citi
Citi analyst Christopher Danely raised the firm’s price target on Intel to $32 from $25.50 and keeps a Neutral rating on the shares. The analyst expects a "mixed bag of results" during the semiconductor earnings season with some companies estimates moving higher such as Intel or Microchip, but some companies moving lower like Qualcomm or GlobalFoundries or AMD. PC and automotive end markets appear solid, but the data center, wireless and industrial end markets remain weak, the analyst tells investors in a research note.
BofA Tweaks Down Intel Estimates
Ahead of first quarter earnings releases, BofA analysts told investors in a note that the firm has tweaked down CY23 INTC sales/pf-EPS estimates by -6%/-38% on continued near-term PC inventory and sluggish data center demand headwinds.
"While higher China spending and Windows 11 refresh should somewhat help demand recover in CY24/25, we highlight elevated inventory for longer impacts INTC disproportionately (vs. AMD, who outsources manufacturing)," they wrote.
