Highlighting continuing investments in technology improvements, chipmaker Intel Corp (Nasdaq: INTC) issued a cautionary statement forecasting a likely dip in profit margin for the next few years. The company also issued mixed fiscal 2021 third-quarter results. While the earnings beat third-quarter results, the revenues missed estimates.
Additionally, Intel also alleged that component scarcity had trimmed its PC chip business revenues by 2%. Following the unimpressive results and profit margin warning, the stock lost over 11.68% or $6.54 to close at $49.46.
The Santa Clara, California-based company reported third-quarter revenues of $19.192 billion, up 5% from $18.333 billion in the comparable quarter last year. Excluding the NAND memory business, adjusted revenues were $18.087 billion in Q3 2021, compared with $17.266 billion in Q3 2020. Analysts surveyed by Refinitiv had anticipated the company to report adjusted revenues of $18.24 billion for the reported quarter.
For the quarter ending September 25th, 2021, the company posted a net income of $6.823 billion, or $1.67 per share, an increase from $4.276 billion, or $1.02 a share, in the quarter ending September 26th, 2020.
Excluding acquisition-related adjustments, restructuring charges, losses (gains) from divestiture, ongoing mark-to-market on marketable equity securities, NAND memory business, and income tax effects, among others, the Q3 2021 non-GAAP net income increased to $6.997 billion, or $1.71 a share, from $4.546 billion, or $1.08 per share in Q3 2020. Analysts surveyed by Refinitiv had anticipated Intel to report non-GAAP earnings of $1.11 per share.
Commenting on the results, Pat Gelsinger, Intel CEO, said, “Q3 shone an even greater spotlight on the global demand for semiconductors, where Intel has the unique breadth and scale to lead. Our focus on execution continued as we started delivering on our IDM 2.0 commitments.”
Segment-wise,
- Client computing revenues declined 2% y-o-y to $9.664 billion. The company revealed a drop in laptop volumes due to scarcity of chips led to a decline in PC sales.
- Data center group revenues were $6.496 billion, up 10% on a y-o-y basis, but missed the analysts’ estimates of $6.66 billion.
- Internet of Things revenues were $1.368 billion, compared with $911 million last year. Specifically, IOTG (internet of things group) revenues surged 54% to $1.042 billion. Likewise, Mobileye, which is focused on automobile chips, posted a growth of 39% to $326 million.
- Non-volatile memory solutions group revenues fell by $48 million to $1.153 billion.
- Programmable solutions group revenues were $478 million, an increase of 16.30% from the prior-year period.
The company’s gross margin was 56% for the third quarter, reflecting an increase of 2.50% from the previous year. Intel intends to spend $20 billion this year to realize its expansion plans, including establishing a semiconductor factory in Arizona. The company also intends to spend heavily on research and development.
The high capital expenditure will affect profit margins, as per a cautionary statement by Intel. In particular, the company warned that its gross margin would decrease, but not below 50%, during the next two to three years and then rebound. Furthermore, Intel also expects free cash flow to decline for the next two to three years.
Intel aims to transform into a manufacturer of chips for other companies while continuing with the designing and manufacturing of its processors. The company believes that it could grab a considerable market share if the chip market doubles in size over the next decade as forecasted.
Looking ahead, the company anticipates fourth-quarter adjusted revenues of roughly $18.30 billion. The Q4 adjusted earnings are anticipated to be about $0.90 per share. Analysts anticipate the company to report earnings of $1.01 per share on revenues of $18.25 billion for the current quarter.
For FY 2021, the company has predicted adjusted revenues of $73.50 billion. Adjusted earnings are currently anticipated to be $5.28 per share, an upward revision from the $4.80 a share forecast earlier. Analysts currently predict earnings of $4.70 per share and revenues of $73.60 billion for the current fiscal year.
The historical price chart indicates that the stock of Intel is declining after facing resistance at 55. The next support is anticipated only near 44. Additionally, the stock is trading below its 50-day moving average, while the Chaikin Money Flow indicator has a negative reading. Therefore, we are anticipating the stock to remain in a downtrend in the short term.
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