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PC chip business has weakened after Apple shifted to its own processors
Chipmaker Intel Corp (NASDAQ: INTC) on Thursday forecasted lower-than-expected second-quarter earnings on worries of weak demand in personal computers, its largest market, and supply-chain uncertainty due to COVID-19 lockdowns in China.
Rising inflation, renewed restrictions in China and uncertainties around the Russia Ukraine war have shifted consumer spending away from gadgets, Intel said.
However, last year the chipmaker generated more than half of its revenue by selling processors for PCs.
Intel said it expects an adjusted profit of 70 cents per share on revenue of about $18 billion for the second quarter, which is below analysts’ estimate of 83 cents per share on $18.38 billion.
Shares of the company dropped over 5% in the extended trading.
“We expect the industry will continue to see challenges until at least 2024 in areas like capacity and tool availability,” Intel CEO Pat Gelsinger told analysts on a conference call.
Increasing competition
Intel’s revenue decreased by 7% year over year to $18.4 billion in the first quarter ended on April 2, while Wall Street estimated $18.31 billion.
Revenue from higher-margin data center and AI business surged 22% to $6 billion but missed the analysts’ estimate, which on average had expected $6.77 billion.
The gross margin has also narrowed to 50.4% from 55.2%.
The chipmaker reported a profit of 87 cents per share, above expectations of 81 cents.
Intel is also facing increasing competition in the data center space, as rivals Nvidia Corp (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) are ramping up their chip production to cater to the booming market amid growth in the metaverse, AI applications and cloud computing.
Moreover, Apple Inc (NASDAQ: AAPL), which used to buy processors from Intel for its iMacs and Macbooks, has shifted to its own processors.
Picture Credit: USNews
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