Intel Corp. data-center sales sank more than expected in Q3, sending shares down 10% in after-hours trading Thursday.
Intel (INTC), reported a decline in profit and revenue from the previous year, while slightly raising its full-year forecast, though still missing expectations for its Q4 sales outlook.
Shares dropped to less than $49 in after-hours action immediately following the report, closing at a price of $53.90.
The chip maker reported third-quarter net income of $4.3 billion, or $1.02 a share, down more than 28% from $5.99 billion, or $1.35 a share, in the year-ago period. After adjusting for restructuring and acquisition-related costs, Intel reported earnings of $1.11 a share, compared with $1.42 a share in the year-ago quarter. Revenue fell to $18.3 billion from $19.19 billion in the year-ago quarter.
Analysts surveyed by FactSet had estimated adjusted earnings of $1.11 a share on revenue of $18.24 billion, while Intel had forecast adjusted earnings of $1.10 a share on revenue of approximately $18.2 billion.
The company said that it now expects adjusted earnings of $4.90 a share on sales of $75.3 billion, after previously stating $4.85 a share on sales of $75 billion.
Intel has been out of favor with investors as their preference for chip-making corporations, such as AMD, is growing. Revenue for AMD has surged 33% in the first half of the year versus the same period in 2019, while net income is up 525% year over year through the first half of the year. On top of that, AMD recently purchased Xilinx, maker of FPGA chips. Xilinx is highly profitable, with revenue of $7.65 billion in 2019.
FPGA chips are programmable in the field, enabling them to be cheaper than custom-built chips. They are used in in a wide range of applications like data centers, industrial equipment. However, more importantly (from a profits stand point), these chips produce eerily similar performance results than that of Intel’s, helping them solidify their market share as the cheaper, yet performance-mirroring product.
There is also rumbling of poor management at Intel, as the overall earnings call was very lackluster. Little focus was put to their technology, the future, how they plan to compete, or even acknowledgement of their competition. They even attempted to blame the COVID-19 pandemic as the reason for their poor numbers when in reality, businesses like Nvidia and AMD, their main competition, is doing much better than usual.
Investors must also be asking themselves, how on earth do data center sales go down when literally everything is moving online?
We may be looking at the next Wall Street Zombie…
Works Cited:
https://www.fool.com/investing/2020/10/09/amd-taking-on-intel-on-a-new-front-with-purchase-o/
https://www.marketwatch.com/story/intel-stock-plunges-10-after-earnings-show-bigger-sales-drop-than-expected-11603397818