Intel released its Q2 2022 financial results on July 28, showing a 22% decline in GAAP revenue on year, to US$15.3 billion, and reported US$500 million in losses for the quarter, the first time in decades.

The gross margin was 36.5%, down 20.6pp from the same period a year ago. But expenditure on R&D and mergers & acquisitions increased by 17% to US$6.2 billion.

Intel CEO Pat Gelsinger blamed the sudden and rapid decline in economic activity as the culprit of the below-standard performance, as well as the company's execution issues. He promised to work on changing business conditions and work closely with customers while remaining focused on strategy and long-term opportunities to accelerate transformation.

In view of the performance of key business units, the client computing group, which contributes the largest share of its revenues, declined 25% on year, to US$7.7 billion. The datacenter and AI group reported a 16% slide in sales, to US$4.6 billion. Intel Foundry Services (IFS) saw a drastic decline of 54% in Q2, contributing only US$122 million in revenues.

The reason for the significant decline in Intel's largest business unit was largely due to the decline in demand for PCs, while OEMs are adjusting their inventories. And Intel attributed the 16% decrease in datacenter and AI business due to competition from AMD, and the decrease in average selling price due to competition, as well as OEM inventory reductions.

The Network and Edge Group (NEX), the Accelerated Computing Systems and Graphics Group (AXG) and Mobileye are the three divisions that enjoyed growth in revenues. It is worth noting that the stellar 41% growth in Mobileye sales is driven by strong demand for its EyeQ product.

Intel mentioned that it has made significant progress on the ramp of Intel 7, now shipping over 35 million units. It also expects Intel 4 to be ready for volume production in the second half of the year and is at or ahead of schedule for Intel 3, 20A and 18A.

For the future outlook, Intel said the COVID-19 pandemic has previously adversely affected significant portions of its business and could have a material adverse effect on its financial condition and results of operations. Interpreted by the numbers, its Q3 revenue is forecasted to be US$15-16 billion, compared to $19.2 billion in the same period a year ago. Gross margin is expected to rebound from the Q2 low to 43.2% in Q3, but that is still a large drop from the 56% in Q3 2021.

For the entire FY2022, revenues are projected to decline 9-13% YoY and down $8-11 billion from the prior outlook; gross margin will be 9.1pp lower on year, down 3pp from prior outlook, while EPS is expected to decline by 57% on year, down $1.30 from prior outlook.

By: DocMemory
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