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Intel stock struggles after chip maker reports Q2 earnings

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Yahoo Finance Live anchors discuss Intel's rough quarter as the chip shortage weighed on earnings.

Video Transcript

- Amazon and Apple look especially good in contrast with our third big tech company that reported. And that is Intel. It struggled in the third quarter. Chip shortages continuing to plague the company. But it's a lot more than that. It expects the current quarter expectations to be well below forecasts. So let's run through quickly here what they exactly said.

They cut their full year sales and profit forecast, and cut it to $65 to $68 billion this year in terms of sales. At that $65, it would be a 13% drop in sales year over year. Gross margin this year-- this is a key metric for the company-- it's going to be 49%, which is a 9.1% drop from 2021. And that's a figure that CEO Pat Gelsinger had really focused on that he was trying to expand.

So the contraction is not a good sign here. And this is after revenue fell 22% last quarter, coming in well below estimates. Earnings per share missing. $0.29 versus the $0.69-- I mean, that is-- I know we were all sort of shocked when we saw this quarter and how big a miss it was. And I know, Sozz, you're going to talk to CEO Pat Gelsinger later on. And, I mean, he said in the statement this was not good news for the company.

- I almost fell off my seat. I was in the office reading the quarter and that's what happened. This is a shocking quarter from Intel, shocking outlook. Their earnings outlook that they put out there, $2.57 a share. The Street was at $3.42. They were previously at over $4 a share in earnings. So sizable miss on earnings. Sizable guidance. So what is going wrong here? I'll point to two things. Some product delays. And also, really, a massive slowdown in the PC market.

Miles Ogden loves this term. TAM. Total addressable market. Well, on that conference call last night, Intel reduced the TAM of the PC market this year. They're looking for a 10% decline this year. So the PC market seems to be in an utter state of chaos as consumers just are not buying PCs at the pace they had been during the pandemic. And it's having ripple effects throughout the industry. But again, this is a wow quarter. And in addition, it looks like they lost market share again in the data center. Likely winner, maybe AMD.

- We've heard about the PC market woes and perhaps the shrinking of that total addressable market in, what, about four reports at this time, whether it's Intel, whether it's HP. We've heard it from Microsoft as well. And then even some of the chip companies. The chip companies, they are most reliant on this continuing to actually maintain, in addition to the data center and the cloud, being able to maintain some type of some type of demand from end users. But that's just not what they're seeing right now.

Some commentary, though, from the CEO, Gelsinger, and I imagine he's going to tell you much more about this later on, saying, in short, we must and will do better, echoed by the CFO, saying, we're taking necessary actions to manage through the current environment, accelerating the deployment of their smart capital strategy. Whatever that may look like in the future, where they're continuing to spend at this point in time, you would hope that it produces not just revenue, but some type of margins, profit margins, over an extended period of time that investors can at least hang in there.

- And there's a lot of skepticism on the Street. Just talking to folks this morning and reading through the notes, there's a lack of disbelief that they can even hit the guidance that they put out here last night, which was well below consensus. So a lot of skepticism specifically around the fourth quarter, where there might be at least as it looks now maybe a return to growth. The Street is not sold that can happen again.

- Right. The company is sort of managing and saying that the third quarter is the bottom. And it sounds like some analysts are convinced that it could be. But not all of them are.

- The PC market. The Street sees the PC market getting worse. And maybe they're right.

- Well, and, again, the problem here is not just the broader market. The problem is the company, which Gelsinger acknowledged. Those delays. If I can't get my chip from Intel and AMD's got the chip, I'm going to obviously go to AMD. It's about in stocks at this point. So I don't know. I don't know. I'm looking forward to that conversation.

- Tune in. 11:45.

- Foundry services. Can you ask about that too because--

- Yeah. Big push. Big huge.

- There's a huge push in the foundry services being able to fabricate chips and--

- Let's get these questions in a Google Doc or something.

- Done deal.

- Yeah. Please help me out.

- Well, one potential good thing for Gelsinger is the Chips Act getting passed and him being able to move forward with some of the--

- Now the new Ohio plant is going to get built. You would have to think that helps them in some capacity.