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Intel shares fell sharply on Thursday after the company said it is experiencing substantial delays in its development of cutting-edge 7-nanometer production technology. That news outshone financial results better than expected.
The delays raise troubling new questions about the company’s ongoing problems in its manufacturing operations that were once presumed, and complicate Intel’s (ticker: INTC) ability to fend off competition from Advanced Micro Devices (AMD) and others. The company recently suffered a shameful loss when Apple (AAPL) decided to switch to ARM-based processors for lines of Mac computers, and move away from Intel processors.
For the second quarter, Intel posted revenue of $ 19.7 billion, up 20% from a year ago, and well ahead of the company’s $ 18.5 billion guidance. Non-GAAP earnings were $ 1.23 a share, also before the guide of $ 1.10 a share. Street estimates had been in line with the orientation.
But the big and disappointing news came in the form of new production problems. The company said that the weather on its first 7nm-based processors is changing approximately six months from previous expectations. Intel said the performance of its 7nm processors is trending approximately 12 months below internal targets.
Intel also said it is accelerating its transition to 10-nanometer line-width products, “with increasing volumes and strong demand for an expanding line.” That includes upcoming Tiger Lake and Ice Lake processors. Intel said that in the second half of 2021 it hopes to deliver a new line of PC processors called Alder Lake, which will be its first 10nm desktop processors, and a new line of 10nm server processors called Sapphire Rapids.
“It was an excellent quarter, well above our expectations for continued strong demand for computing performance to support cloud services, a home learning and work environment, and 5G networking,” said the CEO. Intel Bob Swan said in a statement.
Intel said revenue increased 43% in its data center group, driven by 47% growth in cloud service providers. Revenue from the memory business increased 76%, while the Internet of Things business fell 32%, and the automotive unit Mobileye decreased 27%. The company’s PC business revenue increased 7%.
Non-GAAP net income for the quarter was $ 5.3 billion, 10% more than a year ago. The non-GAAP gross margin was 54.8%, 6.8 points less than a year ago.
For the third quarter, Intel projects revenue of $ 18.2 billion, with non-GAAP earnings of approximately $ 1.10 per share; The street consensus had been $ 18 billion and $ 1.14 per share.
For the full year, Intel projects revenue of approximately $ 75 billion, with non-GAAP earnings of $ 4.85 per share, above Street’s estimates of $ 73.9 billion and $ 4.81 per share.
Write to Eric J. Savitz at [email protected]
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