Published - July 28th, 2023 @ 10:10 AM (GMT+2)

Intel’s Comeback in the PC Market‍

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Intel (NASDAQ:INTC) recently unveiled its latest quarterly report, reflecting a positive turnaround in the personal computer (PC) market. Posting a profit for the first time in recent quarters, Intel's encouraging performance fuelled a 7% surge in extended trading, adding 6% to the company's share price.

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The PC market experienced a significant slump in the past year due to a surplus of inventory, largely a result of the pandemic-driven buying frenzy. However, the situation is gradually stabilizing, with PC shipment decline decreasing to 11.5% in the June quarter from a massive 30% drop in the preceding two quarters. Charter Equity Research analyst Edward Snyder pointed to Intel's strong desktop sales performance as a crucial factor in the company's resurgence.

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Strong Performance Despite Decline in Key Segment
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Despite the PC sector, a key segment of Intel's business, recording a 12% revenue decline to $6.8 billion, Intel's foundry business — which manufactures chips for other firms — saw an impressive revenue leap from $57 million to $232 million year-on-year. Intel's CEO, Pat Gelsinger, largely attributes this uptick to "advanced packaging" technology, a promising area combining chip parts made by different manufacturers into a single powerful chip.

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While Intel's data center and AI business witnessed a 15% drop in sales to $4 billion, the company exceeded expectations, highlighting the ongoing struggle in the server chips market. The dominant demand for AI computing chips, led by Nvidia, and a slow recovery in China have adversely affected Intel's market position. Nevertheless, Gelsinger predicts the data center chip sales will recover in the fourth quarter.

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Q2 Earnings Beat Expectations
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Intel's second-quarter earnings of 13 cents per share and revenue of $12.9 billion outperformed Refinitiv's projections of a 3-cent loss per share and $12.13 billion in revenue. The company's net income reached $1.5 billion or 35 cents per share, starkly contrasting the previous year's loss of $454 million or 11 cents per share. However, Intel's overall revenue fell by 15% to $12.9 billion from $15.3 billion a year ago.

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In anticipation of a continued weakness across all sectors through the end of the year, Intel expects the third quarter to bring earnings of 20 cents per share (adjusted) on revenues of $13.4 billion, exceeding Refinitiv's forecast of 16 cents per share on $13.23 billion in sales. Notably, Intel's gross margin nearly touched 40% on an adjusted basis, outdoing the company's earlier estimate of 37.5%.

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CFO David Zinsner acknowledged the company's strategic cost reductions, totaling $3 billion this year, contributing to the robust report. Additionally, Intel has successfully exited nine lines of business since Gelsinger rejoined, realizing annual savings of over $1.7 billion.

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Intel’s Recovery Strategy & Future Goals
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Even as Intel battles declining sales and shifting market preferences, the company remains committed to its recovery and growth strategy, "five nodes in four years." Aiming to match TSMC's chip-manufacturing prowess by 2026, this plan would position Intel as a formidable competitor in producing the most advanced mobile processors for other companies. Gelsinger confirmed that the company remains on track to reach this ambitious goal.

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