Intel’s profits are collapsing after we stopped buying all these computers

with the COVID spending boom for computers After all, and consumers spooked by inflation and a worsening economy, Intel’s profit and revenue plunged in the second quarter, the chipmaker said Thursday.

Intel’s own problems, such as the chip quality problems that fill the tech giant’s data centers, were also a major factor. The problems prompted CEO Pat Gelsinger to apologize for the company’s poor performance, and the chipmaker saw its share price drop 8% in aftermarket trading.

“This quarter’s results were below the standards we have set for the company and our shareholders,” Gelsinger said in a statement. “We must and will do better.”

The results show how tough a time Intel will have to claw its way back to the forefront of chipmaking and get the U.S. semiconductor industry to regain the influence it lost in Asia. Intel’s near-term problems pose real risks to long-term plans.

Revenue fell 17% to $15.3 billion in the second quarter, and Intel’s profit of 29 cents per share, excluding some charges such as stock-based pay and inventory write-downs, was a 76% decline from a year earlier. -early. Both results were well below Intel’s own forecasts and analysts’ expectations. Including those charges, Intel reported a loss of $454 million.

It could have been a happier day for Intel. Congress approved the CHIPS and Science Act on Thursday that would provide $52.7 billion in subsidies to chipmakers if President Joe Biden signs it as expected. This will reduce the cost of a new chip manufacturing plant or factory to $7 billion instead of $10 billion. These investments are key to Gelsigner’s turnaround plan to catch up with its chipmakers in 2024, then regain manufacturing leadership in 2025.

But that turnaround seems a long way off. Today’s issues include a sudden drop in PC spending as concerns about inflation and the economy, coupled with Intel’s losses to rivals such as AMD in data center sales.

Revenue from Intel’s PC business fell 25% to $7.3 billion. Its data center revenue fell 16% to $4.6 billion. But Chief Financial Officer Dave Zinsser said the second and third quarters were the “financial rock bottom for the company.”

Intel also expects a dismal third quarter. As a result, the company lowered its full-year revenue expectations to a range of $65 billion to $68 billion, significantly less than its previous guidance of $76 billion. In response, it cut its capital spending by $4 billion for the year, now to $23 billion.

When he took over as CEO in 2021, Gelsinger promised clear assessments of the company’s successes and failures, and on a conference call with analysts, he detailed some failures.

Among the issues: Quality issues forced Intel to revise its new Sapphire Rapids server chip, delaying shipments; its new graphics chips were hampered by Intel’s immature software; and losing server market share. “We don’t like the facts, we like what we see,” Gelsinger said.

He and Zinsner encouraged analysts and shareholders to keep Intel’s long-term recovery plan in mind, saying the company is in a growth industry and has weathered economic downturns before and is now laying the groundwork for a long-term turnaround. Modernized manufacturing processes remain on schedule or ahead of schedule.

“We remain firmly on track to achieve process parity in 2024 and excellence in 2025,” Gelsinger said.

These efforts to improve manufacturing coincide with support for the CHIPS Act in Congress and the White House. Allies — including Intel, which lobbied hard for the bill — see it as an attempt to restore the strength of the U.S. semiconductor industry. Two other companies lead today’s cutting-edge processors, Taiwan Semiconductor Manufacturing Co. (TSMC) in Taiwan and Samsung in South Korea. Intel hopes the CHIPS Act will help increase the U.S. share of chip production from today’s 12 percent to an eventual 30 percent.

The company expects its outlook to improve in the fourth quarter. Then PC makers are likely to ramp up chip purchases and new products like the Raptor Lake PC chip will go on sale. That processor will arrive in the fall for desktops and later this year for laptops, Gelsinger said, and will improve performance by more than 10 percent over current Alder Lake chips.

He has a lot to convince.

“Intel’s long-term goals remain strange,” Bernstein analyst Stacey Rasgon said in a research note earlier this week, lowering his expectations for the chipmaker’s outlook. “Honestly, anyone who owns stocks is not there in the near future … rather, they are entering a 5+ year hazy story that is just getting started.”