10-QPeriod: Q3 FY2022

INTEL CORP Quarterly Report for Q3 Ended Jul 2, 2022

Filed July 29, 2022For Securities:INTC

Summary

Intel Corporation reported a significant revenue decline in the second quarter of 2022, with total revenue falling 22% year-over-year to $15.3 billion. 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 million 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% 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.

Financial Highlights

51 data points
Beta

Revenue

$15.32B

36.5% Gross Margin

Net Income

-$454.00M

-3.0% Net Margin

EPS (Diluted)

$-0.11

Total Assets

$170.42B

Cash & Equivalents

$4.39B

Free Cash Flow

-$6.43B

Financial Statements
Beta
Revenue$15.32B
Cost of Revenue$9.73B
Gross Profit$5.59B
R&D Expenses$4.40B
SG&A Expenses$1.80B
Operating Expenses$6.29B
Operating Income-$700.00M
Interest Expense$109.00M
Net Income-$454.00M
EPS (Basic)$-0.11
EPS (Diluted)$-0.11
Shares Outstanding (Basic)4.10B
Shares Outstanding (Diluted)4.10B

Key Highlights

  • 1Total revenue for Q2 2022 was $15.3 billion, a 22% decrease year-over-year, impacted by macroeconomic headwinds and inventory adjustments by customers.
  • 2Net loss reported for Q2 2022 was $454 million, a significant decline from a net income of $5.06 billion in Q2 2021.
  • 3Gross 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.
  • 4Client 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.
  • 5Network and Edge (NEX) revenue showed growth of 11%, primarily driven by increased demand for Ethernet and 5G products.
  • 6Intel announced cost-cutting measures, including a slower pace of hiring, to manage operating expenses and align with its long-term financial model.
  • 7The company experienced a delay in the ramp of Sapphire Rapids (next-gen Intel Xeon Scalable processors), now expected later in the year.

Frequently Asked Questions

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.

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.

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.

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.