Chip giant Intel released its fourth quarter and full-year financial results for 2022 after the U.S. stock market closed on Thursday, local time. The results show that Intel’s fourth-quarter revenue of $ 14 billion, down 32% year-on-year; net loss of nearly $ 700 million, compared with a net profit of $ 4.6 billion in the same period last year; diluted loss of $ 0.16 per share, compared with earnings per share of $ 1.13 in the same period last year. Intel shares plunged nearly 10 percent in after-hours trading following the release of the results.
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Here are the highlights of Intel’s fourth quarter and full-year results.
- Revenue for the fourth quarter was $14 billion, down 32 percent from $20.5 billion a year ago and down 28 percent on a non-GAAP basis. Full-year revenue was $63.1 billion, down 20 percent from $79 billion in the prior year and down 16 percent on a non-GAAP basis.
- Net loss of $700 million in the fourth quarter compared to net income of $4.6 billion in the same period last year, a 114 percent decline from profit to loss and $400 million on a non-GAAP basis, well below $4.7 billion in the same period last year and down 28 percent year-over-year. Full-year net income of $8.0 billion, down 60 percent from $19.9 billion in the prior year and down 65 percent on a non-GAAP basis year-over-year.
- Fourth quarter loss of $0.16 per share compared to earnings of $1.13 per share in the same quarter last year, a 114 percent decline from earnings per share and a 92 percent decline on a non-GAAP basis to $0.1 per share, well below $1.15 in the same quarter last year. For the full year, earnings per share were $1.94, down 60 percent from $4.86 a year ago, and $1.84 per share on a non-GAAP basis, down 65 percent year-over-year.
- The operating profit margin was negative 8.1 percent in the fourth quarter compared to 24.3 percent in the prior year, a decline of 32.4 basis points, and on a non-GAAP basis, the operating profit margin was 4.3 percent, a decline of 23.9 basis points compared to 28.2 percent in the prior year. Full-year operating margin of 3.7 percent, down 19.9 basis points from 24.6 percent in the prior year and down 19.9 basis points on a non-GAAP basis.
- Fourth quarter gross margin was 39.2 percent, down 14.5 basis points from 53.6 percent a year ago, and on a non-GAAP basis, gross margin was 43.8 percent, down 12.1 basis points from 55.8 percent a year ago. For the full year, the gross margin was 42.6 percent, down 12.8 basis points from 55.4 percent in the prior year, and down 10.8 basis points on a non-GAAP basis.
- Fourth quarter research and development and marketing, general and administrative (MG&A) expenses were $6.2 billion, up 2 percent from $6.0 billion in the prior-year quarter. For the full year, MG&A was $24.5 billion, up 13 percent from $21.7 billion in the prior year and up 14 percent on a non-GAAP basis.
Business Highlights
- In the fourth quarter of 2022, CCG’s 13th generation Intel® Core desktop processor family hits the market, starting with the Desktop K processor and the Intel® Z790 chipset. Additionally, in December 2022, Intel, in partnership with ASUS, officially set a new world record for overclocking, driving the 13th generation Intel Core i9-13900K past the 9 gigahertz mark for the first time.
- In January 2023, DCAI ramped up production with the support of customers and partners to meet a large backlog of demand.
- NEX achieved double-digit revenue growth for the second consecutive year as Intel achieved milestones in key products such as IPU E2000 (Mount Evans), Raptor Lake P&S, Alder Lake N and Sapphire Rapids.
- AXG achieved record revenue in both the fourth quarter and full year.
- IFS achieved record revenue for both the fourth quarter and full year, with aggressive design collaboration with 7 of the 10 largest foundry customers. Intel 3nm also added a leading cloud, edge and data center solutions provider as a customer.
- Intel completed the IPO of Mobileye, which delivered record revenue in the fourth quarter and full year of 2022. The company launched the system in 233 different vehicle models in 2022.
- Executive Commentary
- Despite economic and market headwinds, we continued to make good progress on our strategic transformation in the fourth quarter, including advancing our product roadmap and improving our operational structure and processes to drive efficiencies while achieving the low end of our guidance range,” said Pat Gelsinger, Intel’s chief executive officer. Looking ahead to 2023, we will continue to address short-term challenges while working to deliver on our long-term commitments, including delivering leading products based on open and secure platforms, powered by mass production and supported by our outstanding team.”
- David Zinsner, Intel’s chief financial officer, said, “In the fourth quarter, we took steps to right-size our organization, rationalize our investments and prioritize areas where we can deliver the highest value over the long term. These initiatives reinforce our cost reduction goal of $3 billion in 2023 and set the stage for achieving $8 to $10 billion in reductions by the end of 2025.”
Performance Outlook
Intel provided performance guidance for the first quarter of 2023.
- Effective January 2023, Intel extended the estimated useful life of certain manufacturing machines and equipment from five years to eight years. Compared to the estimated useful life as of the end of 2022, Intel expects total depreciation expense to decrease by approximately $4.2 billion in 2023, with an increase in gross profit of approximately $2.6 billion, a decrease in research and development expenses of $0.4 billion, and a decrease in the value of ending inventory of $1.2 billion in 2023.
- In its outlook for the first quarter of 2023, Intel expects this change to improve operating profit by $350 million to $500 million, or $0.07 to $0.10 per share, with approximately 75 percent going to the cost of goods sold and 25 percent to operating expenses. The change in depreciable life will not be included in the $3 billion cost savings plan for 2023 or in the $8 billion to $10 billion target for 2025 announced in the third quarter 2022 earnings release.
- Intel expects the company to report an adjusted net loss of $0.15 per share on revenue of $10.5 billion to $11.5 billion for the first quarter of 2023. Analysts generally expect the company to report earnings of $0.24 per share on revenue of $13.93 billion.
Earnings Interpretation
- For the fourth quarter that ended Dec. 31, 2022, Intel’s revenue declined 32 percent year-over-year. It was the company’s fourth consecutive quarterly sales decline as the personal computer market retreated from the epidemic boom. The company recorded a net loss of $700 million, compared with a profit of $4.6 billion a year earlier.
- Kissinger said on a conference call with analysts that Intel declined to provide a full-year earnings forecast because of the “current environment of uncertainty. At least in the first half of this year, Intel will deal with “continued economic headwinds. He said the weak economic environment has become more complex due to the expansion of the chip inventory.
- In the fourth quarter, Intel’s customer computing group (including PC chips) contributed $6.63 billion in revenue, down 36 percent and below analysts’ general expectations of $7.68 billion. Intel said demand in the consumer and education markets fell sharply and customers reduced their inventories. Market research firm Gartner said the personal computer market has shrunk more than any other quarter since it began tracking the industry in the 1990s.
- On Jan. 12, Intel projected the total target market for personal computers in 2023 at 270 million to 295 million units. On Thursday, the company said it now expects the market to be at the end of that range.
- The data center and AI division, which consists of server chips, memory and field-programmable gate arrays, recorded revenue of $4.3 billion, down 33 percent, but still above analysts’ general expectations of $4.17 billion. Intel said it was experiencing competitive pressure and a decline in market size.
- Intel’s networking and edge division, which includes networking products, posted revenue of $2.06 billion, which was down 1 percent from a year ago and below analysts’ general expectations of $2.26 billion.
- Geerzinger said the current business environment “is driving short-term underloads in our factory networks. Intel Chief Financial Officer Zinsner explained on the conference call that underload charges from underutilized factories narrowed Intel’s gross margin by 220 basis points (2.2 percent) in the fourth quarter and that loading issues in the first quarter would have reduced gross margin by 400 basis points.
- In the fourth quarter, Mobileye, the self-driving hardware and software provider Intel acquired for $15.3 billion in 2017, debuted on Nasdaq, and Intel still controls a majority of the voting rights in Mobileye’s common stock.
- Intel remains the largest U.S. chipmaker by revenue. The semiconductor company has seen an apparent shift toward an oversupply of chips amid concerns about the recession, and a shortage of chips driven by all-digital demand during the height of the new crown pneumonia outbreak. Intel’s market share has also been consistently eroded by competitors such as AMD and semiconductor companies using technology from Arm, a British chip design specialist.
- Kissinger said Intel has launched a massive layoff drive, but the cuts will continue in the first half of the year as the company works to meet a $3 billion spending cut target. “We’re executing cost measures more aggressively,” he said. The CEO said the company has exited seven businesses and saved $1.5 billion since he rejoined in 2021. He added that the company is ending its investment in certain networking hardware.
- Chip companies, including Intel, have cut production schedules and reduced capital spending, including computer memory giants Samsung Electronics and Micron Technology, which play a key role in a segment of the chip market that is seen as a leading indicator of technology demand.
- In the race to make the fastest chips with the smallest transistors, Intel has fallen behind its chip-making rivals in Asia, though Kissinger has laid out plans to return to the lead in a few years. Despite Intel’s spending cuts, it continues to push for unprecedented expansion plans to scale up its chipmaking plants.
- Fueled by potentially billions of dollars worth of government grants and U.S. tax breaks, Intel is building new plants in Arizona, Ohio and Germany and expanding operations elsewhere. Intel executives said they remain committed to major projects, although the company has delayed the start of construction on the German plant because of the worsening market outlook and has taken other money-saving initiatives.
- Kissinger acknowledged, “We are adjusting our near-term spending to manage the cost environment while maintaining our long-term strategic investments. This will be a journey that will last for many years.”
Stock price movement
- Intel shares rose $0.39, or 1.31 percent, to close at $30.09 per share on Thursday, local U.S. time. However, the stock plunged nearly 10 percent in after-hours trading as revenue and first-quarter revenue missed expectations. Over the past 12 months, Intel shares have fallen about 42 percent, while the Standard & Poor’s 500 indexes have fallen 7 percent over the same period.
- In the past 52 weeks, Intel shares have traded as high as $52.51 and as low as $24.59. Based on Thursday’s closing price, Intel’s market capitalization is about $124.2 billion.
