Intel shares plunge 11% after poor earnings show weaker demand

Intel shares fell 11% on Friday, the day after the company reported disappointing second quarter results what is missing in the top and bottom lines.

Intel’s revenue was down 22% year-over-year and missed the consensus by 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 a net profit of $5 billion in the year-ago quarter.

The company also lowered its expectations for the full year. Intel said it now sees adjusted annual earnings of $2.30 per share and revenue of $65 billion to $68 billion, lower than three months ago.

The updated outlook takes into account economic weakness that could cause organizations to delay PC refresh cycles, Intel CFO David Zinsner told CNBC. He said small and medium businesses have slowed down in buying computers, but the business is holding up.

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

Pat Gelsinger, CEO of Intel Corporation, holds a semiconductor chip as he testifies at a Commerce, Science, and Transportation Senate hearing titled “Developing Next Generation Technologies for Innovation” at the Russell Senate Office Building on Wednesday, March 23, 2022.

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

Analysts at Susquehanna downgraded Intel’s stock from neutral to negative and said that while they’d like to think it was a one-time reset, problems persist.

“For decades, Intel has been able to hide many failed projects, failed acquisitions and strategic flaws while promoting Moore’s Law and process leadership,” analysts wrote in a report released Friday. “Unless they regain that lead (we think it’s unlikely) or change strategic direction, we expect Intel’s growth, profitability and cash flow problems to persist.”

Baird analysts also downgraded Intel, citing concerns about supply chain delays and changes in consumer behavior following the pandemic.

“We are increasingly concerned that 20+ year inventory in the PC supply chain could take quarters given what we see as structural changes in consumer PC consumption patterns coupled with seasonally weak first half performance that will continue to weigh on usage. Intel. rates and recovering gross margins,” the report said on Friday.