- Shares rally aftermarket on upgraded Q2 revenue forecast
- Reports biggest ever loss in Q1
- Signs of recovery in chip demand, margin improvement
Shares in microchip maker Intel (INTC:NASDAQ) reversed early losses to gain 3% in post market trading after the company forecasted better-than-expected sales and margins for the second quarter.
First quarter sales to 31 March fell 36% from the same period in 2022 to $11.70 billion, notching up the fifth consecutive quarter of falling sales. Analysts had penciled in sales of $11.04 billion, according to Refinitiv data.
Despite the semiconductor giant recording its biggest ever quarterly loss of $2.80 billion, or $0.66 per share, after stripping out non-core effects, the loss of $0.04 per share was ahead of Street estimates of $0.15.
FINDING A BOTTOM?
Global PC shipments dropped almost 30% in the first quarter according to estimates from market tracker IDC, but CEO Patrick Gelsinger believes the market may be nearing a tough: ‘We are seeing increasing stability in the PC market with inventory corrections largely proceeding as we had expected.’
The PC market has been marred by excess supply following a post-pandemic slump in the personal computer market.
Intel said its cost saving drive was starting to reap rewards with expected savings of $3 billion in 2023 extending to $10 billion a year by 2025.
In a sign of increasing confidence about recovering chip demand the company said it expects second quarter revenue of between $11.5 billion to $12.5 billion, ahead of analysts’ expectations of $11.75 billion.
40%-PLUS GROSS MARGINS TARGETED
After reporting slightly better than expected gross margins of 37.5% in the first quarter chief financial officer David Zinsner said on an investor call that he expects the margin to be ‘comfortably’ in the 40’s in the back half of the year.
Gross margin is a good measure of value add representing the profit after all direct expenses have been deducted, but before operational overheads.
By 2026 Intel is aiming to manufacture more advanced chips to compete with TSMC (TSM:NYSE) for work on Apple’s (AAPL:NASDAQ) A-series chips in iPhones.
