Intel Puts a Happy Face on Its Worst Quarterly Loss Ever
Intel posted its worst quarterly loss in history on Thursday, but the chipmaker took a bold move to put a positive spin on the grim news.
“We delivered solid first-quarter results, representing steady progress with our transformation,” said Pat Gelsinger, Intel's CEO, in a press release.
But the results were anything but solid, with double-digit declines in overall revenue and an unprecedented triple-digit decline in earnings per share.
The company recorded a loss of $2.8 billion, a decline from a profit of $8.1 billion in the same quarter last year. The net loss was on quarterly revenue of $11.7 billion, a decline of 36% compared to the first quarter of 2022.
Intel declared the quarterly earnings a success as revenue was $700 million over the guidance provided by the chipmaker. Intel is currently restructuring the company's operations by cutting product lines, reorganizing divisions, and laying off employees.
Intel’s transformation revolves around becoming a manufacturing-first company by 2025. Gelsinger said the chip market is expected to be a $1 trillion opportunity by 2030.
"We continue to make progress on our commitment to reduce costs and drive efficiencies. We are well on our way towards our goal of reducing $3 billion in costs in 2023, and $8 to $10 billion in annual savings exiting 2025," Gelsinger said during an earnings call.
Revenue for the client computing group was $5.8 billion, down 38% year over year, and the Data Center and AI group revenue was $3.7 billion, which is a year-over-year decline of 39%.
The revenue declines were due to a slump in demand for PC and server chips, which were hurt by macroeconomic headwinds. The demand environment was challenging across the board, and the inventory levels piled up, which reduced demand for its chips.
It was a down quarter for server chips in enterprise and cloud, and that will continue to be the case for the first half of this year, Gelsinger said.
Intel expects to resolve the inventory issues in the second half of the year, but "we're being fairly cautious," Gelsinger said.
Gelsinger also acknowledged that it had a lot of work to do on datacenter products, which was beset by delays and poor execution.
"We have to rebuild our customers’ confidence," Gelsinger said, adding that customer feedback indicates "a strong uptick in their belief that Intel's execution machine is back for their datacenter products of the future."
Next year's server chips, which include Sierra Forest and Granite Rapids, have shipped to customers earlier than expected, Gelsinger said.
The testing of those chips is at the volume validation phase, where customers are receiving enough samples that they can start to do broad validation of the platform.
"That validation cycle is very critical for us because it informs us of when we're ready to move forward with the production steppings of those parts and both the software and the firmware of the platform. We are seeing a very good response," Gelsinger said.
Intel expects to ship the 5th Gen Xeon chip codenamed Emerald Rapids later this year.
The chipmaker is also trying to make its AI chips broadly available. Its Gaudi2 chip is now shipping, and Gelsinger said the Gaudi3 AI chip taped out in the first quarter.
"We're describing to customers our 2025 platform, the Falcon Shores product, which ... brings together the full offering of our HPC and AI into a single platform offering. Customers are responding very well," Gelsinger said.
Intel is starting to show up in this AI space, but "we have a lot of work to do to land meaningful revenue [and] customers in this area," he said.
Intel's main competition in the AI chip market includes Nvidia and AMD. The rivals are generating revenue through GPUs and FPGAs.
Intel is trying to advance four nodes in five years, and the chipmaker highlighted some recent announcements. The company's foundry services division has partnered with Arm to make chips on the 18A process, which is expected to start in 2025.
