01—Abstract
Summary
Summary of the 10-Q filed July 29, 2022. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation reported a significant revenue decline in the second quarter of 2022, with total revenue falling 22% year-over-year to $15.3 billiona.
This downturn was primarily attributed to weakening macroeconomic conditions, including inflation and higher interest rates, along with a reduction in customer purchases as they worked to manage existing inventories. Both the Client Computing Group (CCG) and Data Center and Artificial Intelligence Group (DCAI) segments experienced revenue decreases. The company also reported a net loss of $454 millionb for the quarter, a stark contrast to the $5.06 billion net income in the same period last year.
This was accompanied by a substantial drop in gross margin to 36.5%c from 57.1% year-over-year. Key factors contributing to the lower gross margin included reduced revenue, increased inventory reserves, higher period charges related to product ramps, and an inventory impairment charge for the wind-down of the Intel Optane memory business. Despite these challenges, Intel announced cost-cutting measures, including a slower hiring pace, to manage operating expenditures.
02—Key points
Key Highlights
- Total revenue for Q2 2022 was $15.3 billion, a 22% decrease year-over-year, impacted by macroeconomic headwinds and inventory adjustments by customers.
- Net loss reported for Q2 2022 was $454 million, a significant decline from a net income of $5.06 billion in Q2 2021.
- Gross margin decreased substantially to 36.5% in Q2 2022 from 57.1% in Q2 2021, driven by lower revenue, inventory reserves, and product ramp costs.
- Client Computing Group (CCG) revenue decreased 25% and Datacenter and AI Group (DCAI) revenue decreased 16% due to tempered customer purchases and a weaker demand environment.
- Network and Edge (NEX) revenue showed growth of 11%, primarily driven by increased demand for Ethernet and 5G products.
- Intel announced cost-cutting measures, including a slower pace of hiring, to manage operating expenses and align with its long-term financial model.
- The company experienced a delay in the ramp of Sapphire Rapids (next-gen Intel Xeon Scalable processors), now expected later in the year.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2022, Intel Corp lost $0.03.
- Revenue$15.32B100.0%
- Cost of revenue−$9.73B63.5%
- Gross profit$5.59B36.5%
- Operating costs−$6.29B41.0%
- Operating income−$700.0M4.6%
- Interest, other & tax$246.0M1.6%
- Net income−$454.0M3.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed July 29, 2022Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $15.32B$19.19B | −20.2% |
| Cost of Revenue | $9.73B$8.45B | +15.2% |
| Gross Profit | $5.59B$10.75B | −48.0% |
| R&D Expenses | $4.40B$3.80B | +15.7% |
| SG&A Expenses | $1.80B$1.67B | +7.5% |
| Operating Expenses | $6.29B$5.52B | +13.9% |
| Operating Income | -$700.00M$5.23B | −113.4% |
| Interest Expense | $109.00M$144.00M | −24.3% |
| Net Income | -$454.00M$6.82B | −106.7% |
| EPS (Basic) | $-0.11$1.68 | −106.5% |
| EPS (Diluted) | $-0.11$1.67 | −106.6% |
| Shares Outstanding (Basic) | 4.10B4.06B | +1.0% |
| Shares Outstanding (Diluted) | 4.10B4.09B | +0.3% |
05—Questions
Frequently Asked Questions
What were the main reasons for Intel's revenue decline in Q2 2022?
Intel's revenue decline was primarily due to a weakening and uncertain macroeconomic environment characterized by inflation, higher interest rates, and geopolitical events like the war in Ukraine. Additionally, customers were actively reducing their existing inventories, and there were some supply chain disruptions, particularly following port shutdowns in China.
Why did Intel report a net loss in Q2 2022 after reporting a significant profit in Q2 2021?
The net loss in Q2 2022 was a result of significantly lower gross margins, driven by decreased revenue, higher inventory reserves, and costs associated with new product ramps, including an impairment charge for winding down the Intel Optane memory business. These factors outweighed the gains from equity investments and the divestiture of the NAND memory business.
What is the status of Intel's key product development and launch timelines?
Intel launched its 12th Gen Intel Core HX processors, completing the Alder Lake family. However, the ramp of Sapphire Rapids, part of the next-gen Intel Xeon Scalable processors, is expected later than initially forecasted. This delay is intended to ensure these processors, along with other next-gen Xeon processors, can effectively support new opportunities in AI, networking, and security.
What strategic actions is Intel taking to address the current market conditions?
Intel is implementing cost-cutting measures, including slowing the pace of hiring, to reduce operating expenditures and manage the business towards its long-term financial model. They are also focusing on accelerating their process technology roadmap and product execution to navigate the current economic climate.
06—Continue