Intel's Q1 net profit of $8.1 billion increased by 141% year-on-year

The US chip giant Intel released its financial report for the first quarter of 2022 on April 2nd after the US stock market closed. According to the financial report, Intel's revenue in the first quarter was 18.4 billion US dollars (about 120.888 billion yuan), a year-on-year decrease of 7%, which was higher than the market's expected 18.3 billion US dollars; net profit was 8.1 billion US dollars (about 53.217 billion yuan), an increase of 141% year-on-year. %; adjusted EPS of $0.87, up 141% year over year, beating analysts average estimate of $0.81. The stock fell nearly 4% in after-hours trading as Intel released a second-quarter revenue outlook that fell short of analysts' expectations.

Here are the highlights of Intel's first-quarter earnings report

  • Revenue was $18.4 billion, down 7% from $19.7 billion in the same period last year and above analysts' expectations of $18.31 billion
  • Net profit was US$8.1 billion, an increase of 141% compared to US$3.4 billion in the same period last year
  • Earnings per share of $1.98, a year-on-year increase of 141%, higher than analyst expectations
  • The gross profit margin was 50.4%, compared to 55.2% in the same period last year
  • The operating profit margin was 23.9%, compared to 18.8% in the same period last year
  • Cash generated from operating activities was $5.9 billion and $1.5 billion in dividends paid

By business

  • Customer Computing Group (CCG) revenue was $9.3 billion, down 13% year over year and below analysts' consensus estimate of $9.42 billion
  • Data Center and Artificial Intelligence Group (DCAI) revenue was $6 billion, up 22% year-over-year
  • Network and Edge Computing Group (NEX) revenue was $2.2 billion, up 23% year-over-year
  • Accelerated Computing Systems and Graphics Group (AXG) revenue was $219 million, up 21% year over year
  • Mobileye's revenue was $394 million, up 5% year-over-year
  • Chip foundry business revenue was US$283 million, a year-on-year increase of 175%

Executive Reviews

Intel CEO Pat Gelsinger said: "The first quarter of the year was off to a strong start, with both revenue and net profit exceeding expectations. Facing a $1 trillion market opportunity, we remain focused on our IDM 2.0 strategy. .We executed this strategy well in the first quarter, achieving key product and technology milestones and announcing plans to expand our manufacturing capabilities in the U.S. and Europe to meet continued demand for semiconductors and drive a more balanced, more resilient global supply chain.”

Intel CFO David Zinsner said: "Intel delivered strong first-quarter financial results and we will reiterate our full-year revenue guidance. We remain committed to the financial framework set out at Intel's investor meeting. , including diligently managing the business to drive growth and profitability, and to create value for shareholders.” Zinsner, a former Micron CFO, succeeded George Davis as Intel’s new CFO, The latter has held the position for three years.

Financial report interpretation

In the first quarter, Intel's revenue fell 7 percent year-on-year, and its gross margin narrowed to 50.4 percent from 55.2 percent, Intel said in a statement. "We expect the semiconductor industry to continue to face challenges in areas such as capacity and tool availability until at least 2024, " CEO Kissinger told analysts.

Revenue in the client computing group, which includes personal computer (PC) chips, fell 13% year over year. Market research firm Gartner had estimated that PC shipments fell 6.8% in the first quarter. But Microsoft said on Tuesday that the business PC market was strong, boosting the device maker's Windows license sales.

Sales of Intel chips used in desktop computers and laptops fell due to weaker demand in the consumer and education sectors, as well as Apple's move to homegrown PC processors. In addition, device makers have been reducing inventories to meet demand and align with other parts supplies, which also negatively impacted Intel's performance.

The segment's operating margin fell from 40% to 30%. Management said the drop in operating income was due to the company's shift to next-generation chip architectures and investments in its roadmap.

Intel revised its earnings structure in the first quarter and disclosed a segment called "data center and artificial intelligence," which includes chips, some accelerators, memory, and field-programmable gate arrays, among others. The segment's revenue jumped 22 percent to $6.03 billion, on strong demand from large data center operators and enterprises.

Intel said the server chip, code-named "Granite Rapids," will launch in 2024, not 2023, as chipmakers struggle to buy enough manufacturing equipment and ramp up production to meet demand. The semiconductor industry has faced a turbulent period of surging demand, and Intel has struggled to keep pace with demand as the company grapples with a spate of disruptions and disruptions to global supply chains.

Still, Kissinger said the challenges won't derail the manufacturing expansion he is promoting. Intel has pledged to buy foundry Tower Semiconductor and announced plans to build chip factories in Germany and the U.S. state of Ohio.

Despite the chip shortage, industry executives expect annual global chip sales to double to more than $1 trillion by 2030. Under Kissinger's leadership, Intel's transformation has been going on for more than a year. He took over from Intel last year with a mission to regain the company's lead in chip-making technology from Asian rivals.

Intel has been the dominant U.S. chipmaker for decades, with a huge market share in the chips that power desktops, laptops, and servers in data centers. But Intel has suffered repeated setbacks in recent years, falling behind rivals in making smaller, faster chips.

Performance Outlook

Intel expects adjusted second-quarter earnings of $0.7 per share on revenue of $ 18 billion. Analysts on average had expected adjusted earnings per share of $0.83 on revenue of $18.38 billion.

For the full year of 2022, Intel raised its adjusted U.S. stock earnings forecast by $0.1 to $3.60 per share on revenue of $76 billion. Analysts on average expected adjusted earnings of $3.50 per share on revenue of $75.78 billion.

Inventory challenges should persist into the second quarter, but they ease in the second half, Zinsner said. The outbreak has exacerbated supply concerns, and inflation could reduce PC shipments throughout the year, Zinsner said.

Kissinger said Intel is aiming to deliver a server chip code-named "Sapphire Rapids," which is faster than a 2019 chip with the code-name "Ice Lake." All companies operating hyper-scale data centers are waiting in line, he said.

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