UPDATED 18:30 EDT / JANUARY 26 2022

INFRA

Intel’s earnings results beat estimates as data center chip sales grow 20%

Computer chip giant Intel Corp. reported strong fourth-quarter results this afternoon as its revenue came in a full $1.2 billion above guidance and profit topped forecasts as well.

Even so, the company’s stock fell around 3% in after-hours trading.

Intel reported net income of $4.6 billion on earnings of $1.09 per share, down 21% from a year ago. Adjusted revenue for the period rose 4%, to $19.5 billion. That was better than expected, with analysts forecasting Intel to report earnings of just 91 cents per share on revenue of $18.31 billion.

The performance was all the more inspiring because the sales number excludes Intel’s NAND flash business, which is in the process of being sold.

Intel Chief Executive Pat Gelsinger said the four quarter had marked a “great finish to a great year” for the chipmaker, as it “exceeded top-line quarterly guidance by over $1 billion and delivered the best quarterly and full-year revenue” in its history.

The record-breaking quarter could have been more impressive, had Intel’s biggest business, its client computing group, not seen a decline in sales. The segment saw revenue fall 7% in the quarter to $10.1 billion. Desktop chip sales volume within that unit was up 7%, while average selling prices increased 11%. However, mobile processor sales fell 26% year-over-year.

In an interview with CNBC, Gelsinger blamed the annual decline in sales in the group on a mixture of supply constraints and customers and PC makers shifting sales from quarter to quarter.

The CEO said he expects PC sales to remain strong for the foreseeable future. On Tuesday, Microsoft Corp. reported that sales in its personal computing group rose almost 16% from a year earlier and its CEO, Satya Nadella, said PC demand was strong.

Intel’s data center group delivered a very strong performance, reporting $7.3 billion in revenue, up 20% from a year ago. Data center sales saw a pick up of 17% in volume of units compared to the same quarter last year, while average selling prices were up 4%.

“Q4 was really marked by the on-premise, enterprise and government sector strength,” Gelsinger told CNBC. Once again he revealed, supply constraints were harming sales, saying that some clients were having trouble securing components such as Ethernet power controllers that are needed to build new Intel-powered servers.

In the interview, Gelsinger insisted that Intel’s next-generation Sapphire Rapids server chip is on track to ship this quarter, with production set to ramp up in the second quarter. Analysts were worried the chip, which will be built on a new manufacturing process, might be delayed.

Under Gelsinger, Intel has entered a period of massive capital expenditure as it looks to build out its chip manufacturing capacity. In a major shift, the company has said it will also begin manufacturing chips for other firms.

Intel needs new facilities to push that strategy forward and those will require massive investments.

To fulfill those ambitions, Intel said last week it will build a huge chip factory complex in Ohio that could eventually house as many as eight fabs. Intel is hoping to start producing chips there by 2025, and will invest $20 billion to get the first two factories up and running.

“First, we have to invest to catch up,” Gelsinger said. “We’re behind on capacity, you know, we would lust after having some free capacity today.”

Charles King of Pund-IT Inc. told SiliconANGLE that Intel performed well in the previous quarter, especially in light of the ongoing supply chain and component shortages that have added challenges to silicon manufacturing. “The company’s data center solutions were a particular bright point and I expect they will continue to perform well in the quarters ahead,” he said.

King did raise concerns over some potential uncertainties that might affect Intel and its computer manufacturing partners, such as whether or not people will continue working from home or begin returning to traditional offices.

“Intel’s planned investments in next-gen fabs, like the facility in Ohio that it recently announced, could also exact a toll, though exactly what that will be is unclear,” he continued. “Those points aside, Intel appears well-positioned and has the right leadership to be highly optimistic about the journey ahead.”

With Intel’s massive investments in the U.S. and elsewhere, the company warned last quarter its margin is likely to shrink over the next two to three years. However, even with its lowered expectations, its margin forecast of 52% today only narrowly missed Wall Street’s estimate of 53%.

Intel also posted strong guidance for its fiscal 2022 first quarter, saying it sees revenue of $18.3 billion. That’s well ahead of Wall Street’s $17.61 billion forecast.

Photo: SiliconANGLE

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