As Intel’s Revenue Plunge Continues, CEO Says Comeback Plan On Track

The downward spiral of Intel’s revenue continues but CEO Pat Gelsinger says the future is still bright: ‘We’re laser-focused on controlling the things that we can, and every aspect of our execution, cost management and transformation is in our hands — and we are well underway in executing against those paths.’

Intel’s revenue is continuing its downward spiral that began in 2022, but that’s not shaking CEO Pat Gelsinger’s resolve that things will eventually get better for the semiconductor giant as he expects the company to achieve critical milestones in his comeback plan over the next couple years.

The Santa Clara, California-based company on Thursday reported $14 billion in revenue for the fourth quarter of 2022, a 28 percent year-over-year decline that Gelsinger attributed to “unprecedented volatility” in the economy. That revenue figure fell short of the average estimate by Wall Street analysts, and the chipmaker’s earnings per share of 10 cents came under analyst expectations too.

[Related: Intel Board Chair Shakeup: Omar Ishrak Out, Frank Yeary In]

Gelsinger seemed to indicate that Intel is moving faster than before with the multi-year, multibillion-dollar cost-cutting plan the company announced in the previous quarter.

“We are even more aggressively executing on the cost measures we described in Q3, even as we keep the investments critical to our long-term transformation intact, with a clear eye of making the right capital allocation decisions to drive the most long-term value,” he said on Intel’s earnings call.

Intel doesn’t expect the revenue situation to improve anytime soon. The company projected that revenue in the first quarter of this year will be roughly $10.5 billion to $11.5 billion, which would amount to a 37.5 percent decline from the same period in 2022 on the high end. And unlike previous earnings reports, the company declined to provide guidance for full-year revenue in 2023.

“We expect macro weakness to persist at least through the first half of the year, with the possibility of second-half improvements. However, given the uncertainty in the current environment, we are not going to provide revenue guidance beyond Q1,” Gelsinger said.

Those signals prompted Intel’s stock price to fall more than 9 percent in after-hours trading Thursday.

A Plunge In PC And Server Revenue Continues

What’s mainly ailing Intel is the same as the last two quarters: double-digit declines in sales for the company’s two largest businesses, PC chips and server chips. In the Client Computing Group, fourth-quarter revenue decreased 36 percent year-over-year to $6.6 billion. Data Center and AI sales, on the other hand, shrunk by 33 percent over the same period to $4.3 billion.

Despite the “deterioration” the PC market continued to experience, Intel managed to gain market share against x86 rival AMD in the second half of 2022, according to Gelsinger. While companies in the PC ecosystem continue to deplete inventory of Intel products from last year, the CEO said PC usage data indicates that the market will endure in the long term.

“We remain clear-eyed on managing to near-term weakness in PCs, but we also see the enduring and increasing value PCs have in our daily lives,” he said.

As for the server world, Intel blamed the double-digit drop in revenue on a slowdown in the market and “competitive pressure.” Gelsinger added that demand from enterprise customers and China was weaker than it was from hyperscale customers.

“However, we’d highlight that the correction in enterprise and the rest of world where we have stronger positions are further along than hyperscale,” he said.

Gelsinger Promises A Brighter Future

While Intel expects a good chunk of 2023 to be a challenge, Gelsinger said the company remains on track to surpass chip-making rivals in advanced chip manufacturing capabilities by 2025, the main goal of the Intel veteran’s ambitious comeback plan.

“We are at or ahead of our goal of five nodes in four years,” he said, describing the plan to introduce five new manufacturing processes between 2021 and 2025.

Part of this comeback plan also includes the introduction of new processors that Gelsinger believes will make Intel more competitive against its increasingly capable rival, AMD, and other chip designers.

Gelsinger said Intel’s next-generation Core processor family for client PCs, code-named Meteor Lake, is still expected for the second half of this year. That’s when Intel is also expected to start shipping Granite Rapids, the code name for the successor to Intel’s fourth-generation Xeon Scalable CPU family.

With the recent launch of the fourth-generation Xeon Scalable chips, Gelsinger believes the company will be in a better position to defend against the expanding footprints of Intel’s data center competitors.

“We realized that we stumbled, we lost share, we lost momentum. We think that stabilizes this year, and we’re going to be building a roadmap that allows us to regain leadership for the long term in this critical market,” he said.

This is part of why Gelsinger believes the company is on the path to a better future, even if the near term looks more uncertain than before.

“The macro is difficult. It was difficult in Q4. We expect it to remain difficult as we go through the first half of the year. But we‘re laser-focused on controlling the things that we can, and every aspect of our execution, cost management and transformation is in our hands — and we are well underway in executing against those paths,” Gelsinger said.

Intel’s full-year revenue for 2022 was $63.1 billion, a 20 percent decline from the year before.