01—Abstract
Summary
Summary of the 10-Q filed April 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation reported a challenging first quarter for 2023, with total revenue declining 36% year-over-year to $11.7 billiona.
This significant drop was primarily driven by weak demand across its core segments, Client Computing Group (CCG) and Data Center and AI (DCAI), which saw revenue decreases of 38%b and 39%, respectively. The company attributes these declines to a difficult macroeconomic environment, including slowing consumer and enterprise demand, inflation, and higher interest rates, leading customers to reduce inventory levels.
Despite the revenue downturn, Intel highlighted key product introductions, including its 13th Gen Intel Core mobile processor family and 4th Gen Intel Xeon Scalable processors, alongside strategic partnerships like the one with Arm for its 18A process. The company also reported a net loss of $2.76 billionc for the quarter, a stark contrast to the significant profit in the prior year, impacted by lower gross margins and increased charges, including those related to excess manufacturing capacity.
02—Key points
Key Highlights
- Total revenue for Q1 2023 was $11.7 billion, a decrease of 36% compared to $18.3 billion in Q1 2022.
- Net income attributable to Intel was a loss of $2.76 billion ($0.66 loss per diluted share), compared to a net income of $8.11 billion ($1.98 diluted EPS) in Q1 2022.
- Client Computing Group (CCG) revenue declined 38% to $5.77 billion, and Data Center and AI (DCAI) revenue fell 39% to $3.72 billion, both impacted by reduced customer demand and inventory digestion.
- Gross margin significantly compressed to 34.2% from 50.4% in the prior year, attributed to lower revenue, higher unit costs, and excess capacity charges.
- The company announced key product launches including the 13th Gen Intel Core mobile processor family and the 4th Gen Intel Xeon Scalable processors.
- Intel Foundry Services (IFS) reported revenue of $118 million, down 22% year-over-year, with an operating loss of $140 million, impacted by startup costs.
- The company issued $11.0 billion in senior notes in Q1 2023 and amended its revolving credit facilities, indicating a strategic move to manage liquidity and fund future investments.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2023, Intel Corp lost $0.24.
- Revenue$11.71B100.0%
- Cost of revenue−$7.71B65.8%
- Gross profit$4.01B34.2%
- Operating costs−$5.48B46.7%
- Operating income−$1.47B12.5%
- Interest, other & tax−$1.29B11.0%
- Net income−$2.76B23.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed April 28, 2023Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $11.71B$18.35B | −36.2% |
| Cost of Revenue | $7.71B$9.11B | −15.4% |
| Gross Profit | $4.01B$9.24B | −56.6% |
| R&D Expenses | $4.11B$4.36B | −5.8% |
| SG&A Expenses | $1.30B$1.75B | −25.6% |
| Operating Expenses | $5.48B$4.90B | +11.7% |
| Operating Income | -$1.47B$4.34B | −133.8% |
| Interest Expense | $193.00M$124.00M | +55.6% |
| Net Income | -$2.76B$8.11B | −134.0% |
| EPS (Basic) | $-0.66$1.99 | −133.2% |
| EPS (Diluted) | $-0.66$1.98 | −133.3% |
| Shares Outstanding (Basic) | 4.15B4.08B | +1.8% |
| Shares Outstanding (Diluted) | 4.15B4.11B | +1.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant revenue decline in Q1 2023?
The primary driver for the revenue decline was a challenging macroeconomic environment characterized by slowing consumer and enterprise demand, persistent inflation, and higher interest rates. This led customers to temper purchases to reduce existing inventories and adjust to the uncertainty, impacting Intel's core segments like CCG and DCAI.
How did Intel's profitability change compared to the previous year?
Profitability significantly decreased. Intel reported a net loss attributable to Intel of $2.76 billion for Q1 2023, a sharp contrast to a net income of $8.11 billion in Q1 2022. This was driven by a substantial drop in gross margin to 34.2% from 50.4% in the prior year, due to lower revenues, increased unit costs, and excess capacity charges.
What strategic actions is Intel taking to navigate the current market conditions and invest in the future?
Intel is focused on its IDM 2.0 strategy, introducing new leadership products like the 13th Gen Core mobile processors and 4th Gen Xeon Scalable processors. They have also secured strategic partnerships, such as the agreement with Arm for the Intel 18A process. Financially, Intel issued $11.0 billion in senior notes to fund general corporate purposes, including debt refinancing and capital expenditures, demonstrating a commitment to managing liquidity and investing in future growth initiatives.
What is the status of the Tower Semiconductor acquisition?
Intel is still working to close the acquisition of Tower Semiconductor Ltd., which is expected to advance its IDM 2.0 strategy. The transaction is subject to regulatory approvals and customary closing conditions. If regulatory approvals are not obtained by August 15, 2023, Intel may be obligated to pay a termination fee of $353 million.
06—Continue