(Bloomberg) — Intel Corp., the largest maker of personal computer processors, tumbled in late trading after issuing a lackluster forecast for the current period, signaling that it is still struggling to return to the top of the chip industry.
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Second-quarter revenue will be about $13 billion, the company said in a statement Thursday. That compares with an average analyst estimate of $13.6 billion, according to data compiled by Bloomberg. Earnings will be 10 cents per share, minus certain items, versus a projection of 24 cents.
The outlook indicates that an effort by CEO Pat Gelsinger to revive Intel will take more time and money. The company was once the world’s dominant chipmaker and lags behind competitors such as Nvidia Corp. in terms of revenue and technological knowledge. and Taiwan Semiconductor Manufacturing Co.
While he acknowledged that business was slower than expected, Chief Financial Officer Dave Zinsner said he expected an improvement later this year. Intel also couldn’t meet all the demand for processors used in new AI-enabled PCs because its packaging facilities couldn’t produce enough components.
“The first half of the year was a bit softer than we would have liked,” he said in an interview. “The second half of the year will hold quite a bit of momentum.”
Intel shares fell as much as 9.4% in extended trading after the report’s release. The stock was already down 30% at the close this year, making it the second-worst performer on the Philadelphia Stock Exchange Semiconductor Index.
In the first quarter, the Santa Clara, California-based company had earnings of 18 cents per share, excluding certain items, and revenue of $12.7 billion. Analysts had estimated earnings of 13 cents per share and revenue of $12.7 billion.
The chipmaker reports profits for the first time under a new corporate structure that shows the financial performance of its manufacturing operations. Gelsinger has said the approach is a necessary step to make operations more efficient and competitive. Intel has also built a foundry business, which produces components for outside companies on a contract basis.
Read more: Intel suffers worst decline in two months on gloomy outlook
Earlier this month, the company gave investors a first look at the financial health of its factory network. It wasn’t encouraging. Spending on new factories has widened losses, and Intel doesn’t expect the company to break even for several years.
Intel Foundry, the new division responsible for manufacturing, had revenues of $18.9 billion in 2023, up from $27.5 billion the year before. The unit had revenues of $4.4 billion in the first quarter of 2024.
The foundry business posted an operating loss of about $2.5 billion in the first quarter, larger than losses in the previous quarter and the year before.
The company’s PC-related chip sales were $7.5 billion, compared to an average estimate of $7.4 billion. The data center and AI division had revenue of $3 billion, in line with Wall Street forecasts. Network chips generated sales of nearly $1.4 billion, beating the average estimate of $1.3 billion.
Gross margin – or the percentage of sales remaining after deducting production costs – was 45.1% in the quarter. This closely watched metric, which reflects the efficiency of Intel’s manufacturing operations, will be 43.5% in the current period. Historically, Intel has posted margins of over 60%.
Intel remains optimistic about the second half of the year as it rolls out a new version of the Gaudi chip – its answer to the red-hot AI accelerators sold by Nvidia. That product line will bring in about $500 million in sales this year once the latest version goes on sale, Intel predicted.
The company is also making progress in reducing costs and expects its manufacturing operations to break even in the coming years, Zinsner said.
Gelsinger said the company has won a new customer for a manufacturing technology called 18A, which Intel will introduce in 2025. That brings the total to six. The customer, which Intel did not identify, is in the aerospace defense industry and wants manufacturing to take place in the U.S., Gelsinger said.
So far, the chipmaker has only been able to name one company that has signed up to use 18A: Microsoft Corp. It plans to rely on Intel to produce certain types of internal chip designs the software maker is working on.
(Updates with comments on foundry operations, AI chips in penultimate paragraph.)
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