Intel Shares Sinked 17% After Disappointing Revenue Outlook
Higher costs for components such as storage, used alongside Intel’s CPUs, could constrain demand for systems based on its processors.
Quick overview
- Intel's shares fell by up to 17% after a disappointing first-quarter financial outlook due to supply constraints.
- The company expects first-quarter revenue of approximately $12.2 billion, below analysts' expectations of $12.6 billion.
- Despite challenges, Intel reported strong fourth-quarter earnings, exceeding expectations with $0.15 per share and $13.7 billion in revenue.
- Intel faces intense competition and rising component costs, which may further impact its product demand and gross margins.
According to Intel executive John Pitzer, the main reason behind the weaker-than-expected outlook is supply constraints.
Intel shares (and related ADRs) fell sharply on Friday, plunging as much as 17% after the company issued a first-quarter financial outlook that came in below Wall Street expectations.
Intel expects first-quarter revenue of around $12.2 billion at the midpoint, compared with analysts’ forecasts of roughly $12.6 billion. The company also projected earnings per share of $0, below the market consensus estimate of $0.08.
John Pitzer, corporate vice president of investor relations, said the primary driver of the disappointing forecast is supply constraints that are limiting Intel’s ability to meet the full extent of customer demand.
“Our biggest near-term challenge is that we can’t fulfill all the demand our customers are giving us,” Pitzer said in an interview, adding that supply limitations will be most pronounced in the first quarter.
Intel Delivers Solid Results
Despite concerns about the start of the year, Intel exceeded expectations on several fronts in its fourth-quarter report. The company posted earnings per share of $0.15, above the $0.09 expected by Wall Street analysts, and revenue of $13.7 billion, also beating forecasts, though down 4% year over year.
Intel also highlighted that its artificial intelligence-related businesses posted “double-digit” growth both sequentially and year over year, underscoring rising demand for its CPU-focused data center chips.
Still, the company faces intense competition from rivals such as AMD and Arm, adding pressure to its product business. In addition, Intel is investing heavily in advanced manufacturing processes, including its 18A and 14A nodes, which involve significant costs and could weigh on gross margins.
Higher costs for components such as memory and storage—used alongside Intel’s CPUs—could also constrain demand for systems based on its processors, Chief Financial Officer David Zinsner said during a call with analysts.
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