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Intel's data center chip sales slide amid bleak Q2 earnings results

Intel reported declining data center revenue amid a slide in its PC business and a weak outlook for the remainder of the year.

Pat Gelsinger, Intel CEO, speaks at Intel Vision 2022 on May 10 in Dallas. During the hybrid event, Intel’s leaders announced advancements across silicon, software and services, showcasing how Intel brings together technologies and the ecosystem to unlock business value for customers today and in the future. (Credit: Walden Kirsch/Intel Corporation)

Intel reported a 16% decline in its data center and AI business amid a swath of grim results.

Photo: Walden Kirsch/Intel Corporation

Intel issued a grim quarterly report card Thursday, telling investors that the company’s ever-important data center and AI business revenue declined 16% to $4.6 billion.


Intel said that the poor results were mostly due to a weakened economy, supply chain and inventory disruption and “competitive pressures.”

“This quarter’s results were below the standards we have set for the company and our shareholders,” CEO Pat Gelsinger said in a statement. “We must and will do better.”

The company’s third-quarter outlook didn’t offer much relief: Intel said it now expects per-share profit of 12 cents on revenue of $15 billion to $16 billion. Its stock was down 8% in after-hours trading.

Overall, Intel reported a second-quarter net loss of $500 million on revenue of $15.3 billion; revenue dropped 22% compared with the second quarter of last year. The company’s gross margin dropped nearly 21 percentage points to 37% — typical industry margins run at 50% or above, as Intel’s had for years. Both revenue and losses missed Intel’s own forecast and Wall Street estimates by a wide margin, according to data from Sentieo.

In a conference call late Thursday, Intel executives said the company’s data center business suffered because it had difficulties assembling “match sets” or the complete group of components necessary to ship a finished product to a customer. Growing macro-economic concerns are hurting demand in the second half of the year, and Gelsinger said the company had lowered expectations accordingly.

Executives also confirmed that Intel wasn’t planning to manufacture its Sapphire Rapids server chips at high volume until next year — roughly half a year from its prior guidance — despite making some version of the chip already.

“[It’s] later than we expected, Sapphire Rapids,” CFO David Zinsner said. “It’s ramping later. We have some SKUs out, which is good, but the main SKUs are not out and they happen later in the year. And of course, they’ll contribute way more significantly to next year than they’re going to contribute to this year.”

The company’s PC segment revenue — which has been Intel’s largest for years — declined 25% to $7.7 billion, hurt by the slowdown in demand for consumer electronics. The fledging contract manufacturing revenue declined by more than half to $122 million.

Mobileye, the company’s self-driving unit, was a bright spot, and it reported a 41% jump in revenue to $460 million.

This story was updated with additional information from Intel's earnings conference call.

Correction: An earlier version of this story misstated the gross margin percentage point drop. This story was updated on July 28, 2022.

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