2 min Applications

Intel expects a 20% drop in data centre sales

Intel expects a 20% drop in data centre sales

Intel reported its Q1 2021 revenue ($19.7 billion), surpassing what analysts expected. However, it was not enough to prevent the price from slipping. The stock closed after going down by 1.77% and slipped down even more in after-hours trading.

Analysts had forecast that the revenue would be about $17.5 billion. That would mean that GAAP earnings-per-share would be $0.82 and $1.39 for non-GAAP earnings-per-share, about $0.29 higher than what the company thought at the start of 2021. The market disappointment might be because of Intel’s Q2 2021 earnings-per-share guidance ($1.05), which is lower than the expected figure of $1.09.

What does the CEO say?

The fact that profits fell 41% in the first quarter doesn’t work in favor of Intel. Pat Gelsinger, the CEO, hailed the strong Q1 earnings with revenue down only 1% year-on-year. He said that the company’s response to its new IDM 2.0 strategy has been ‘extraordinary’ and that the roadmap is ‘gaining momentum.’

The plans, he said, are re-invigorated with a focus on innovation and execution. He added that ‘this is a pivotal year for Intel.’

IDM stands for Integrated Device Manufacturing, which describes Intel’s strategy, laid out by Gelsinger in March.

Intel’s plans for the future

Intel has committed $20 billion to build a new Intel Foundry in Arizona. The report card looks like this:

  • Revenue: $19.7 billion, -1% year-over-year
  • Gross Margin: 55.2%
  • R&D and MG&A: $5 billion
  • Operating Margin: 18.8%
  • Tax Rate: 14%
  • Net Income: $3.4 billion, down 41%
  • Earnings Per Share (GAAP/non-GAAP): $0.82/$1.39
  • Client Computing Group: $10.6 billion, +8%
  • Data Center Group: $5.6 billion, -20%

Gelsinger said that Q1 was better than expected, adding that the global chip shortage highlights the importance of the Intel IDM 2.0 strategy, though it will take some years for the investments to balance supply and demand.