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Intel's (INTC) Q2 Earnings and Revenues Miss Estimates

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Intel Corporation (INTC - Free Report) reported weak second-quarter 2022 results, wherein both the bottom line and the top line missed the Zacks Consensus Estimate.

Quarter Details

The company reported a GAAP net loss of $454 million or a loss of 11 cents per share in the second quarter against a net income of $5,061 million or $1.24 per share in the year-ago quarter. The significant decline was due to a sudden and rapid fall in economic activity that resulted in top-line contraction. Non-GAAP earnings in the reported quarter were $1,181 million or 29 cents per share compared with $5,571 million or $1.36 per share a year ago. The bottom line missed the Zacks Consensus Estimate by 40 cents.
GAAP revenues were $15,321 million, down 22% year over year, owing to softness in the end consumer and educational market demand. In response to supply chain and match-set issues, the company is closely collaborating with customers and suppliers to effectively address their most critical needs. Non-GAAP revenues totaled $15,321 million compared with $18,533 million in the year-earlier quarter. The top line missed the consensus estimate of $17,921 million.

 

Intel Corporation Price, Consensus and EPS Surprise

Intel Corporation Price, Consensus and EPS Surprise

Intel Corporation price-consensus-eps-surprise-chart | Intel Corporation Quote

Segment Performance

Intel has reorganized its business segments to better reflect the growth in both large traditional markets and high-growth emerging markets for increased transparency, focus and accountability.

Client Computing Group (CCG, 49.6% of total operating segment revenues) revenues were down 25.2% year over year to $7,665 million. This was impacted largely by global TAM weakness, particularly in consumer, education, and small/medium business markets.

Datacenter and AI Group (DCAI, 30.1%) revenues fell 16.2% year over year to $4,649 million. This was due to OEM inventory reductions, mix-related ASP decline and competitive pressures. The company has a singular focus on regaining performance and TCO leadership across all workloads and use cases from enterprise to cloud.

Network and Edge Group (NEX, 15.1%) revenues improved 10.8% to $2,333 million. This was due to the strength and data center networking products, specifically networking Ethernet and 5G. It began shipping Mount Evans, an IPU the company co-developed, and is now beginning to ramp with a large hyperscale partner.

Revenues from Accelerated Computing Systems and Graphics Group (AXG, 1.2%) were up to $186 million. This was due to the ramp-up of Super Compute and Alchemist discrete GPU products. The energy-efficient blockchain accelerator Blockscale achieved a major milestone in revenue shipments to the company’s lead customers going from tape-in to shipping in less than a year. Mobileye (3%) revenues were up 40.7% to $460 million. Intel Foundry Services (IFS, 0.8%) revenues were $122 million.

Other Operating Details

Non-GAAP gross margin was 44.8%, down 1500 basis points (bps) on a year-over-year basis. Non-GAAP research and development and marketing, general and administrative expenses increased to $5.5 billion from $4.6 billion. Non-GAAP operating margin contracted 2,570 bps year over year to 9.2%.
CCG operating income was down 73% year over year to $1,085 million, while DCAI operating income fell 89.8% to $ 214 million. NEX operating income fell to $241 million from $605 million, while Mobileye’s operating income improved to $190 million from $133 million a year ago.

Cash Flow & Liquidity

As of Jun 30, 2022, Intel had cash and cash equivalents of $4,390 million, with $32,548 million of long-term debt. The company generated $6,700 million of cash from operations in the first six months of 2022 compared with $14,149 million in the prior-year period.

Outlook

For the third quarter of 2022, Intel expects non-GAAP revenues to be around $15-16 billion. Non-GAAP gross margin is likely to be 46.5%. Non-GAAP earnings are expected to be 35 cents per share.
For 2022, the company expects non-GAAP revenues to be around $65-68 billion, down from prior expectations of $76 billion owing to challenging macroeconomic conditions with high probability of a recession and supply-chain headwinds due to COVID-19 lockdown restrictions. Non-GAAP gross margin is likely to be 49%. Non-GAAP earnings are expected to be $2.30 per share.

Zacks Rank & Stocks to Consider

Intel currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ingevity Corporation (NGVT - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 22.6%, on average, in the trailing four quarters. Over the past year, the stock has fallen 21.1%.

Earnings estimates for the current year have moved down 0.5% since July 2021. Ingevity’s primary strategy is to produce high-performance activated carbon materials and specialty chemicals.

Assurant, Inc. (AIZ - Free Report) , sporting a Zacks Rank #1, is another key pick for investors. It delivered an earnings surprise of 31.1% in the previous quarter and a stellar earnings surprise of 18.3%, on average, in the trailing four quarters. The company is a global provider of risk management solutions in the housing and lifestyle market.

Earnings estimates for the current year have moved up 6.5% since July 2021.

MRC Global Inc. (MRC - Free Report) sports a Zacks Rank #1. The Zacks Consensus Estimate for MRC Global’s current-year earnings has been revised 38.6% upward since July 2021.

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