Intel Suffers Historically Bad Quarter on Weak PC Demand, Competition

Intel’s financials took a nose dive in Q4 with the chip maker posting its worst earnings in years.

During the holiday quarter, the company posted a rare net loss of $661 million, the second largest loss the company has experienced(Opens in a new window) in the past decade

Intel’s revenue for Q4 also plunged 32% year over year to $14 billion, the lowest quarterly revenue the chip maker has seen since 2016(Opens in a new window). In addition, financial analysts were alarmed(Opens in a new window) to see the company’s gross margin fall to 39.2% when it’s historically been closer to 60%.

Intel blames the poor earnings on the economic downturn and inflation, which dragged down chip demand. The PC market has also cooled off after experiencing two years of soaring growth during the COVID-19 pandemic, when many consumers and businesses upgraded their PCs.

“To various degrees, all our markets are being impacted by macro uncertainty, rising interest rates, geopolitical tensions in Europe and COVID impacts in Asia, especially in China,” added Intel CEO Pat Gelsinger during an earnings call. “In the PC market, we saw a further deterioration as we ended calendar year 22.”

The weak demand has caused PC vendors and retailers to hold off on restocking inventories since last year. The financial pain is expected to continue in Q1. Intel is projecting its revenues will only reach between $10.5 to $11.5 billion, a 42% to 37% decrease from the year before.

Other factors impacting Intel include the company spending billions to build new chip factories for its foundry business, along with increased competition from AMD and Apple, which has been using its own Arm processors to power the latest Macs.

But despite the terrible earnings, the company’s long-term strategy of focusing on cutting-edge chip designs remains solid. “We are at, or ahead of, our goal of five nodes in four years,” Gelsinger said. “On Intel 4, we are ready today for manufacturing, and we look forward to the Meteor Lake ramp in the second half of the year. Intel 3 continues to show great health and is on track.”

The company’s goal is to “regain transistor performance and power performance leadership by 2025,” after suffering numerous delays with advancing its chip manufacturing processes. In the meantime, Gelsinger conceded Intel faces a “long way to achieve our financial expectations.”