(Bloomberg) — Intel Corp., the largest maker of PC processors, slumped in late trading after the company gave weak guidance for the current period, suggesting the company is still struggling to get to the top return to 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 were 10 cents per share, net of certain items, versus a forecast of 24 cents.
The outlook suggests that a push by Chief Executive Pat Gelsinger to revive Intel will take more time and money. The once world-leading chipmaker is lagging rivals like Nvidia Corp. and Taiwan Semiconductor Manufacturing Co. lag behind in sales and technological know-how.
Chief Financial Officer Dave Zinsner acknowledged that business was slower than expected, but said he expects improvement later this year. Intel also was unable to meet all of the demand for processors for new AI-enabled PCs because its packaging facilities were unable to produce enough components.
“The first half of the year was a little weaker than we would have liked,” he said in an interview. “The second half of the year will be pretty strong.”
Intel shares fell as much as 9.4% in extended trading after the report was released. The stock had already lost 30% this year by market close, making it the second-worst performer on the Philadelphia Stock Exchange Semiconductor Index.
In the first quarter, the Santa Clara, Calif.-based company reported profit of 18 cents per share, excluding certain items, on revenue of $12.7 billion. Analysts had estimated profit of 13 cents per share and revenue of $12.7 billion.
The chipmaker is reporting profits for the first time under a new business structure that shows the financial performance of its manufacturing operations. Gelsinger said the approach is a necessary step to make operations more efficient and competitive. Intel has also set up a foundry business that produces components for outside companies on a contract basis.
Read more: Intel suffers worst decline in two months due to 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 equipment 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 revenue of $18.9 billion in 2023, up from $27.5 billion the previous year. The unit posted revenue 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, surpassing losses in the previous quarter and the year-ago quarter.
The company’s PC chip sales were $7.5 billion, compared to an average estimate of $7.4 billion. Its data center and AI division posted revenue of $3 billion, in line with Wall Street forecasts. Networking chips drove nearly $1.4 billion in sales, topping the average estimate of $1.3 billion.
Gross margin – or the percentage of sales remaining after production costs are deducted – 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 achieved margins of more than 60%.
Intel remains optimistic about the second half of the year as it launches a new version of the Gaudi chip – its answer to the red-hot AI accelerators that Nvidia sells. Intel predicts this product line will bring in around $500 million in sales this year once the latest version hits the market.
The company is also making progress in cutting costs and expects its manufacturing business to reach breakeven in the “next few years,” Zinsner said.
Gelsinger said the company has secured another customer for a production technology called 18A that Intel will introduce in 2025. This brings the total to six. The customer, which Intel did not name, is in the aerospace defense industry and wants to have production 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. The company plans to rely on Intel to produce certain types of in-house chip designs that the software maker is working on.
(Updates with comments on foundry business, AI chips in second to last paragraph.)
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