Intel, under immense pressure from internal execution delays in key segments – DCAI, AXG and product design, and economic headwinds from falling consumer demand and fiscal tightening, reported its eighth consecutive YoY revenue decline and its first net loss in 30 years, amounting to $454 Mn.

This was well below the guidance issued at its Investor Day and Q1 quarterly earnings where it projected to be above 50%.

Client Computing: OEM inventory reductions and soft demand contribute to 25% revenue decline; Lowest since 2014

Client Computing Revenues were at $7.7 Bn a 25% decline in YoY revenues and 29% decline in the ‘Notebook’ segment. The biggest decline factors were:

The company expects the revenue to decline in Q3 and then rise again in Q4 due to inventory balancing and price increases. The company expects a 10% decline in the PC TAM for this financial year.

The company expects its roadmap of Raptor Lake processors to be on schedule for this Q3 and Q4 for desktop and notebook chip releases respectively.

Datacenter and AI (DCAI) underperforms due to execution issues, match-set issues and ethernet & power supply component shortages

The DCAI revenue was $4.6 Bn a 16% YoY decline.

The company had launched its last generation of processors – Ice Lake in 2019 and Cooper Lake in 2020 with some upgrades in 2021.

The company launched its next gen AI accelerator Gaudi2 and its software platform security capability – Amber for AI driven continuous optimizations. On an optimistic note, the company emphasizes the deals it has with Meta, Nvidia and AWS for its multi-year and multi-generational compute expansion.

Network and Edge (NEX) segment provides some green amidst the deep red CCG and DCAI revenues

Revenue grew 11% YoY at $2.3 Bn with Xeon D (processor for Network & Edge) and Mount Evans helping to drive the revenue as leading network companies adopt the product into their network infrastructure.

Accelerated Computing Systems and Graphics (AXG) revenue grew 5% with software issues delaying some launches

The AXG revenue stood at $186 Mn representing a 5% increase in revenue YoY.

Mobileye has its best ever quarter revenue at $460 Mn representing 46% YoY growth

Mobileye continued to outperform the market and increased its backlog by over 21 million units for the upcoming quarters. 16 million units were shipped in the first half of 2022. The company expects to add more customers and is extensively deploying capital for next generation ADAS products.

Intel Foundry Services (IFS) gains support and forms IFS Cloud Alliance to improve foundry design efficiency, time-to-market

The revenue of IFS was $126 Mn representing a 54% decline YoY due to lower mass tool sales as well as a revenue decrease in the automotive segment due to customer shortages in the automotive market.

Additionally, the IFS Cloud alliance was launched with leading cloud providers – Azure and AWS, and EDA tool providers – Ansys, Cadence, Siemens and Synopsys, to enable secure design environments in the cloud, improving design efficiency and accelerating the time-to-market for chips.

Outlook for Q3 2022 and FY 2022

The capex reduction will directly impact the wafer fab equipment delivery and possible delays in fab expansion and capacity.

The primary reasons for the forecast revenue declines include – product roadmap delays in DCAI and software issues in AXG product segments. Dampened demand from desktop and notebook industry amid worsening consumer sentiment is also dragging on the revenue outlook.

The company has already indicated a not-too-good Q3 with some breathing room available from Q4.

Though, the company has reiterated its position is on track for its future nodes and product releases we believe the latter half-year launches will crystallize the current status of its advanced nodes and likely delivery of its future product roadmaps.

Akshara Bassi is a Research Analyst with Counterpoint Research based in India with primary focus on Global Cloud & Server Markets. She has more than five years of work experience in market research and strategy consulting focusing on digital transformation and new market opportunities. She has worked across Semiconductor, Aviation & FMCG industries. She holds a Masters in Business Administration from MDI Gurgaon, Masters in European Business from ESCP Paris and Bachelors in Electrical & Electronics Engineering from Panjab University.

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