Intel posts biggest quarterly loss in company history as processor sales plunge

[nanoguy]

Bottom line: Unlike other tech giants like Microsoft and Google, Intel's bottom line is hurting this year. The company saw a $2.8 billion loss in Q1 – the worst in its history and a major hit at a time when it is scrambling to pivot towards an open foundry model and protect its future. CEO Pat Gelsinger assumed a lot of risks with the new strategy and believes it will pay off in spades, but we'll have to wait and see.

Intel isn't in great shape right now. The tech giant's Q1 2023 revenues fell 36 percent year-over-year to $11.7 billion – the largest drop recorded by the company in its 55 years of existence. While it did pay dividends of over $1.5 billion, investors are worried about the long-term profitability of the company as its gross margin dropped from 50.4 percent in Q1 to 34.2 percent in the first quarter of this year.

One thing is clear – Intel and Microsoft's fortunes have been diverging in the past several years in stark contrast to the days of the infamous Wintel empire. The Redmond giant is doing better than most tech giants during an economic storm, and its tech culture and focus have changed a lot in recent years. Meanwhile, Intel has yet to achieve the same transformation despite hopes that Pat Gelsinger's return to the company would have the same effect as that of Steve Jobs when he went back to Apple.

When zooming in on the latest financial report, the figures look brutal for Intel. The Client Computing Group (CCG) recorded $5.8 billion in revenue in the first three months of 2023, a sharp 28 percent decline year-over-year. Like Samsung, the Santa Clara company blames low consumer demand and inventory adjustments at OEMs for the result.

Still, CCG remains the biggest revenue driver and CEO Pat Gelsinger expressed optimism about a potential recovery in consumer and enterprise spending on PC and server processors. It's also worth noting that Intel recently reorganized its GPU division into two smaller units that are now integrated into the Client Computing Group and Data Center and AI Group, respectively.

Intel believes it can become a major player in the discrete GPU market and has laid out an aggressive roadmap for 2nd and 3rd-gen Arc GPUs, codenamed Battlemage and Celestial. So far it has only managed to capture six percent of the global market for laptop and desktop GPUs, which is a good start but not great for the bottom line. Intel fellow Tom Petersen earlier this year confirmed the company is sacrificing profit margins to grow market share, while the GPU division burned at least $3.5 billion between Q1 2021 and its recent reorganization in Q4 2022.

Moving on to the Data Center and AI Group (DCAI), it recorded $3.7 billion in revenue in the three months of 2023, a staggering 39 percent drop compared to the same period last year. This is an area where Gelsinger believes the worst is yet to come, and it's not hard to see why. Overall sales of x86 server chips are down, OEMs have surplus inventory, and AMD is happily chipping away at Intel's market share while Amazon, Facebook, and other tech giants are keen on embracing custom silicon based on Arm designs.

Also read: How to sell a CPU

The Network and Edge Group (NEX) fared slightly better, though it still saw a 30 percent year-over-year drop to $1.5 billion in Q1 2023. Meanwhile, Intel Foundry Services (IFS) made a meager $118 in total sales and lost $140 million, something Intel says is the result of surging costs for building new fabs. IFS is central to Intel's strategy for the next decade, as the company wants to catch up with the likes of TSMC by 2025 and become a coveted contract chip manufacturer for companies both big and small.

MobilEye – a company Intel bought in 2017 to develop self-driving tech – is the only bright spot in an otherwise gloomy financial report. It recorded revenues of $458 million in Q1 2023, which is a healthy 16 percent increase year-over-year.

During an investor call, Intel briefly noted it is currently ramping up production on Intel 4 wafers, while development on Intel 3, Intel 20A, and Intel 18A remains on track. We expect the company will launch its Meteor Lake processors in the second half of this year, and these will be the first designs to also use TSMC nodes for the GPU, SoC, and I/O tiles in addition to Intel's own process technology.

Permalink to story.

https://www.techspot.com/news/98501-intel-posts-biggest-quarterly-loss-company-history-processor.html

 

[brucek]

I hope Intel doesn't read this article, note its poor performance relative to Microsoft, and decide to follow their approach. I do not want to have to log into my CPU, or have it serve me ads, or track me, etc etc.

 

[Thatsdisgusting]

I think it's time for 1099$ 13950KS!

Or maybe another great idea! - 56C+16c server part!

 

[Julnor]

Good they deserve it. Can only BS anti-consumer practices for so long until it catches up to you. I hope it gets worse for them. Not interested in AMD having no competition at all so I guess I want Intel to end up with I don't know 15% of the market as they bottom out, and hopefully start making quality products for a competitive price again.

 

[Kashim]

This is nothing. They have huge cash reserves still. Call me when they've lost 50%+ of the juicy server market to AMD. They've had the lion's share of the segment for far too long by locking in customers with their BS. It's time for them to feel some pain. Maybe then they'll change their ways (probably not).

 

[Dimitrios]

Good they deserve it. Can only BS anti-consumer practices for so long until it catches up to you. I hope it gets worse for them. Not interested in AMD having no competition at all so I guess I want Intel to end up with I don't know 15% of the market as they bottom out, and hopefully start making quality products for a competitive price again.

Didn't Intel get a few Billion from the CHIPS ACT?

 

[Kashim]

Didn't Intel get a few Billion from the CHIPS ACT?

"Intel has said previously it hopes to receive as much as $3 billion for each new fab it builds in the U.S. and has noted the $3 billion per fab is a cap in the legislation."

"Intel could receive anywhere from $2.5 billion to $7.5 billion for its Arizona and Ohio fab projects."

Not sure if they already got any of it yet, but they're basically building more fabs just to get government handouts.

"Intel cash on hand for 2022 was $28.338B, a 3.13% decline from 2021."

They have over $28 billion cash, but they'll happily take several billion from the tax payers. The poor and the middle class get to fund ultra rich corporations. Isn't capitalism wonderful?

 

[Neatfeatguy]

Quick! Intel only walked away with billions of dollars instead of billio....

Huh. Intel still made billions of dollars, yes? I think they're doing okay.

 

[BuckarooBonzaii]

Intel is like an oil company and has lots of cash and like GM, they are part of the Government's exclusive club.

 

[loki1944]

Not surprising given the tanking economy, plus the fact that there has been no huge leap in cpu performance since 2008's Bloomfield i7; everything after is incremental, and for the average user, unecessary.

 

[Watzupken]

"Intel has said previously it hopes to receive as much as $3 billion for each new fab it builds in the U.S. and has noted the $3 billion per fab is a cap in the legislation."

"Intel could receive anywhere from $2.5 billion to $7.5 billion for its Arizona and Ohio fab projects."

Not sure if they already got any of it yet, but they're basically building more fabs just to get government handouts.

"Intel cash on hand for 2022 was $28.338B, a 3.13% decline from 2021."

They have over $28 billion cash, but they'll happily take several billion from the tax payers. The poor and the middle class get to fund ultra rich corporations. Isn't capitalism wonderful?

I feel the money they are getting is just a fraction of what they need to invest for these fabs. While Pat is very optimistic and he rightfully have to in front of the investors, I actually feel it will become their undoing. The fab business can do very well in good times, but given the US sanctions left right and center on whichever countries that do not play ball with them, these fabs will face an increasingly smaller market/ clients to sell.

 

[takaozo]

The fabless operation of AMD turned out to be more smart that having your own fabs but still your main products came from competition aka TSMC. I wonder what division they will close/sell next.

 

[Achaios]

Just posting to say how happy I am. I wish AMD continue their streak of triumphs.

 

[Plutoisaplanet]

Quick! Intel only walked away with billions of dollars instead of billio....

Huh. Intel still made billions of dollars, yes? I think they're doing okay.

Every company has revenue. In Q1, Intel lost $2.8B (net income).

$1.8B of that was paid for by their cash reserves. This quarter they invested an additional $8.5B in the business, most of it funded by new debt. As someone else mentioned, they have $28B in cash (much more when looking at other assets like inventory), but they also have $50B in debt.

In the end, they aren’t doing just fine. There’s not a serious concern yet, but the future doesn’t bode well unless things change eventually.

 

[yRaz]

"Intel has said previously it hopes to receive as much as $3 billion for each new fab it builds in the U.S. and has noted the $3 billion per fab is a cap in the legislation."

"Intel could receive anywhere from $2.5 billion to $7.5 billion for its Arizona and Ohio fab projects."

Not sure if they already got any of it yet, but they're basically building more fabs just to get government handouts.

"Intel cash on hand for 2022 was $28.338B, a 3.13% decline from 2021."

They have over $28 billion cash, but they'll happily take several billion from the tax payers. The poor and the middle class get to fund ultra rich corporations. Isn't capitalism wonderful?

They have started construction of the Ohio fab and the Arizona fab, from what I was told in my last meeting, is still in the planning phase. Intel, to my knowledge, has been set to receive $1.8 billion for the Ohio fab but they were fighting for more money.

Intel being down 36% is silly, they still offer lots of good products and are very under valued right now. I'm not a financial advisor but I know I'm buying some Intel stock at these prices.

 

[Achaios]

Not surprising given the tanking economy, plus the fact that there has been no huge leap in cpu performance since 2008's Bloomfield i7; everything after is incremental, and for the average user, unecessary.

You probably mean the i5-2500k Sandy Bridge (and not Bloomfield), right? I was just thinking that the i5-2500k has to have been one of the most successful and highest selling chips in history, a huge success for Intel and a chip that single-handedly made anything made by AMD at the time obsolete.

The second part of your statement is probably true, too. Someone playing e-sports or say, WoW exlusively, could still easily do so on a i5-2500k.

Largely, as you say, incremental progress after i5-2500k is largely irrelevant for the vast majority of ppl out there.

 

[hwertz]

I'm excited over ARMs myself.. I used an ARM chromebook (with an NVidia Tegra TK1) that I threw Ubuntu onto an SDCard on... other than the crap "disk" speed of the sdcard slowing things up occasionally, that thing flew! Quad core 2.2ghz ARMs and a GPU about dead even with a GTX650... with 22 hour battery life (for real, I'd get 20-2 hours web surfing and whatever; and even when I ran video encodes maxing out the cores, I'd get about 12 hours.) I have an Intel desktop, Intel notebook, and recently had a AMD Ryzen notebook; but luckily Ubuntu on ARM is just as good as it is on Intel, and there are now excellent software to run x86/x86-64 binaries on the ARM. When I used the chromebook I used qemu but there's a few intel-on-ARM solutions now that surpass what qemu could do.)

 

[Kashim]

I feel the money they are getting is just a fraction of what they need to invest for these fabs. While Pat is very optimistic and he rightfully have to in front of the investors, I actually feel it will become their undoing. The fab business can do very well in good times, but given the US sanctions left right and center on whichever countries that do not play ball with them, these fabs will face an increasingly smaller market/ clients to sell.

Sure, fabs are expensive. Lots of things are expensive. Those EUV machines are very expensive too. It doesn't justify using tax payer money to partly pay for it. If you want to gamble, do it with your own money not with government handouts.

Intel always had their own fabs both during good times and bad. They could've taken full advantage of their position back during the good times when they were ahead of the pack and had the most advanced tech on the market. But no, they wanted to charge so much to use their fabs that almost no one would build anything there. Trying to squeeze out competitors like AMD was more important to them than looking forward.

Not only that, they chose not to keep investing in more advanced tech but tried to milk their existing tech for all they could. You reap what you sow, as the saying goes.

I'm no fan of sanctions at all, but something has to give. Globalization sounds great in theory, but how is it fair that every big corporation is allowed to move their business to the cheapest place on earth simply to maximize profits?

The rich keep getting richer and the average person is getting nowhere. I don't live in the US, but I understand where they're coming from on these issues. I'm sure all these big companies would happily take billions of government handouts and move it all overseas for the cheapest labor, no regulations, no unions, no benefits, etc. At some point something has to change.

 

[loki1944]

You probably mean the i5-2500k Sandy Bridge (and not Bloomfield), right? I was just thinking that the i5-2500k has to have been one of the most successful and highest selling chips in history, a huge success for Intel and a chip that single-handedly made anything made by AMD at the time obsolete.

The second part of your statement is probably true, too. Someone playing e-sports or say, WoW exlusively, could still easily do so on a i5-2500k.

Largely, as you say, incremental progress after i5-2500k is largely irrelevant for the vast majority of ppl out there.

No; I mean i7 920 . I've got i7 920/930/960 from Bloomield as well as i7 980X from Gulftown. I also have tested QX6700 and Q9650 C2Qs, and more recent i7 4770K, 5930K, 6850K, 7800X, 10700KF and i9 10920X systems. My i7 920 @3.8Ghz with 12GB DDR3 RAM@1444Mhz gets about 70% the performance of my i7 7800X@4.6Ghz with 32GB DDR4 RAM@XMP 3200Mhz @3440x1440 with GTX 1080Ti and RTX 3080Ti.

Point being; even an almost 15 year old i7 920 is pleny hp wise for most consumers; so anything newer from even the ealry 2010s is plenty for most if it has 4c4t or 4c8t .

 

[hwertz]

Not only that, they chose not to keep investing in more advanced tech but tried to milk their existing tech for all they could. You reap what you sow, as the saying goes.

Just to point out, they didn't stop investing in new chip tech; they just had major problems with their 10nm (I don't know if it failed outright or just had far too low a yield) that took like 2 or 3 years to sort out. The plan had been to straight up milk the (now working) 10nm while they "jumped over" a process or two and developed a 2-3nm process. Of course this doesn't really change the outcome any, I think everything you said about this is spot on.

 

[Irata]

This is nothing. They have huge cash reserves still. Call me when they've lost 50%+ of the juicy server market to AMD. They've had the lion's share of the segment for far too long by locking in customers with their BS. It's time for them to feel some pain. Maybe then they'll change their ways (probably not).

They have cash, however their current assets are slightly below their current debt.

And a company of this size needs a lot of money just to jeep going.

As for the server market, market share is just one factor, margins another very important one.

You could probably have the town‘s most frequented bar if you sold all drinks for 50 cents, but you probably couldn‘t sustain this for a long time, I.e. sales are good but not if you lose money due to them.

 

[Dimitrios]

"Intel has said previously it hopes to receive as much as $3 billion for each new fab it builds in the U.S. and has noted the $3 billion per fab is a cap in the legislation."

"Intel could receive anywhere from $2.5 billion to $7.5 billion for its Arizona and Ohio fab projects."

Not sure if they already got any of it yet, but they're basically building more fabs just to get government handouts.

"Intel cash on hand for 2022 was $28.338B, a 3.13% decline from 2021."

They have over $28 billion cash, but they'll happily take several billion from the tax payers. The poor and the middle class get to fund ultra rich corporations. Isn't capitalism wonderful?

I was expecting this answer and good to see others know what's up. People still doing their homework & having a good memory. I was afraid a certain side would chime in with a quick cookie cutter generic like comment filled with hate & ignorance. There is still hope out there. Thank you.

 

[pcnthuziast]

Hopefully they can stay the course with their venture into the discrete graphics market. Honestly the 16gb A770 is an impressive first gen product that I'd gladly take over anything from the green and red teams at twice the price.

 

[Irata]

Hopefully they can stay the course with their venture into the discrete graphics market. Honestly the 16gb A770 is an impressive first gen product that I'd gladly take over anything from the green and red teams at twice the price.

The faster alternatives to Arc (for gaming) aren‘t twice as expensive.

 

[wiyosaya]

Intel's performance is squarely on Intel. If they had not given everyone piddling performance increases for astronomical increases in price, they might be doing better now. However, IMO, Intel got high on its monopoly of the market, and if you ask me, they are still high on their past monopoly of the market. Its time for them to wake up to the reality of the market and that not everyone is willing to pay big-bucks because Intel.