Components & Peripherals News
Intel’s Earnings ‘Collapse’ And Its Comeback Plan: 7 Things To Know
Dylan Martin
The semiconductor giant’s latest earnings report has investors concerned that Intel has a steeper hill to climb to return to growth and higher profitability as part of CEO Pat Gelsinger’s comeback plan. CRN rounds up seven important things to know about Intel’s fourth-quarter 2022 earnings report and how it plans to recover.
What’s Behind Intel’s Declining Revenue
The main culprits for Intel’s plummet in fourth-quarter revenue were significant downswings in demand for the company’s chips in PCs and servers.
“To various degrees, all our markets are being impacted by macro uncertainty, rising interest rates, geopolitical tensions in Europe, and COVID impacts in Asia, especially in China,” Gelsinger said in the company’s earnings call last week.
Intel’s PC business, the Client Computing Group, generated $6.6 billion, down 36 percent from the same period in 2021. This brought the group’s 2022 total to $31.7 billion, a 23 percent decline.
One of the main issues with the PC business, according to Gelsinger, is that lower demand has translated into plenty of Intel’s partners, including distributors and OEMs, holding excess inventory. This means a reduced need for these companies to buy more chips from Intel.
The company’s server business, the Datacenter and AI Group, includes other products such as field-programmable gate arrays, but Intel’s Xeon server chips make up most of the revenue. For the fourth quarter, the group brought in $4.3 billion, down 33 percent year-over-year. This brought the group’s total revenue last year to $19.2 billion, a 15 percent decline.
Intel blamed this decline on a contracting data center market and increased competition, with the latter resulting in similar inventory issues with partners and customers. Sales to hyperscale customers—the world’s largest data center operators—increased in 2022 while sales to enterprises and Chinese customers were down, according to Gelsinger.
Not all of Intel’s businesses saw declining revenue. However, their collective growth wasn’t enough to offset the big losses from the company’s PC and server businesses.
Intel’s Network and Edge Group brought in $2.1 billion in fourth-quarter revenue, a 1 percent year-over-year decline. This contributed to $8.9 billion in total sales for the group in 2022, an 11 percent year-over-year increase.
The company’s smaller businesses all grew in the fourth quarter and for 2022. Mobileye, a subsidiary that spun out into a public company last year, grew 59 percent year-over-year to $565 million in the fourth quarter. The Accelerated Computing Systems and Graphics Group, which includes Intel’s new discrete graphics products, increased 1 percent year-over-year to $247 million in the quarter.
Revenue grew 30 percent year-over-year to $319 million in the fourth quarter for Intel Foundry Services, the company’s revitalized contract chip manufacturing business. That brought the division’s total 2022 sales to $895 million, a tiny fraction of the revenues generated by Asian foundry giants TSMC and Samsung, which Intel hopes to take on with the business unit.
