Intel gives dire forecast on PC demand as it flags loss

San Francisco - Intel said on Thursday that it expects to lose money in the current quarter, surprising investors with a bleaker-than-expected outlook for the personal computer (PC) market and slowing growth in its key data centre division.

The company’s shares fell 9.5 per cent in trading after the bell.

“We stumbled, right, we lost share, we lost momentum. We think that stabilises this year,” chief executive Pat Gelsinger told investors on a conference call. He said Intel has been losing market share in the data centre market, a nod at the strength of rival Advanced Micro Devices (AMD).

Two of Intel’s most important markets are showing weakness after two years of strong growth as remote work boomed during the pandemic.

Now, the PC industry is struggling with a glut of chips after demand for consumer electronics fell off a cliff and business customers wary of a recession are slowing spending on data centres.

Mr Gelsinger said customers were emptying inventory. “We expect some of the largest inventory corrections literally that we’ve ever seen in the industry taking place that’s affecting the Q1 guide in a meaningful way.”

“Everything hinges on the PC market recovery. AMD isn’t immune to this either,” said Mr Wayne Lam, an analyst at CCS Insight. “Don’t think we’ve seen the bottom for Intel. They are not running a sustainable business model.”

Intel expects profit margins to fall further after dropping from 58.4 per cent in the fourth quarter of 2020 to 43.8 per cent in the fourth quarter of 2022. “It’s safe to say that ambitions to return to a 60 per cent margin in the future are light years away,” said CFRA Research analyst Angelo Zino.

Intel reiterated its medium-term goal of 51-53 per cent gross margin, and 54-58 per cent longer term.

Shares of other microchip firms also fell; AMD lost 2.6 per cent and Nvidia Corp shed 2 per cent.

PC shipments fell 16.5 per cent to 292.3 million units in 2022, data from research firm IDC shows, forcing chipmakers to cut output and slash revenue forecasts.

Shrinking PC demand also pressured Microsoft’s More Personal Computing segment, which includes Windows, devices and search revenue, leading to a 19 per cent drop in the segment in its second quarter.

Meanwhile, the data centre market has slowed from double-digit growth as businesses cut costs amid an economic slowdown.

Since Mr Gelsinger returned to the company nearly two years ago, Intel has focused on regaining the lead in chipmaking technology. Outsourcing the chipmaking process has helped rivals like AMD make much smaller and faster chips and outpace Intel’s technology. REUTERS