Intel (INTC) earnings Q3 2021

Pat Gelsinger

Horacio Villalobos | Corbis News | Getty Images

Intel shares fell more than 6% Thursday on a weaker-than-expected sales report and after the company blamed a shortage of industry components for a 2% contraction in its computer chip business during the quarter.

Intel’s chief financial officer, George Davis, has announced plans to retire in May 2022.

Here’s how Intel works against Refinitiv’s estimates:

  • Earnings per share: $1.71, adjusted, versus $1.11 expected.
  • Revenue: $18.1 billion, adjusted, versus $18.24 billion expected.

Intel said it expects about $18.3 billion in adjusted sales in the current quarter, compared with analysts’ expectations of $18.24 billion.

Intel’s largest business, the customer computing group, declined 2% year over year to $9.7 billion. Includes revenue from PC chips. Intel said PC sales have fallen primarily because of laptop volumes being reduced due to a lack of chips, and that its customers may lack other parts they need to finish assembling the PCs.

“We call them matching clusters, where we might have the CPU, but you don’t have an LCD screen, or you don’t have Wi-Fi. Data centers particularly struggle with some power chips and some networking or Ethernet chips,” said Pat Gelsinger, CEO. Intel, in an interview with CNBC.

Gelsinger said he doesn’t expect the semiconductor shortage to end until 2023.

“We’re at their worst now, every quarter next year we’ll gradually improve, but they won’t have a supply-demand balance until 2023,” Gelsinger said.

PC sales have been strong over the past year as consumers around the world need new laptops and desktops to work from home. But the surge in computers linked to the pandemic may be coming to an end as sales slow, according to analysts.

Gelsinger said he thought the increase in PC sales was likely a trend that would continue. “We think the PC segment is now structurally larger, sort of a million-unit-a-day business,” Gelsinger said.

Intel’s Data Center Group, which sells processors and other silicon for data centers, generated $6.5 billion in sales, up 10% year on year, but fell short of analysts’ estimates of $6.66 billion.

Intel is going through a period of massive capital spending as it is spending $20 billion this year, including on a new semiconductor plant in Arizona. Investors are closely watching Intel’s gross margin as the company spends on ramping up new product lines to catch competitors in semiconductor performance.

The company plans to change its business model to become a manufacturer or foundry for other chip designers, in addition to continuing to design and manufacture its own processors.

Striving to become a foundry is an expensive initiative whose costs can be borne by government support in the United States and Europe. During the quarter, Intel said, Intel signed on to the US government as a customer for the foundry.

Intel is likely to provide more details about how it sees the transition to the foundry and its views on its technology roadmap next month on its Analysis Day, which the company will move to next February on Thursday. It was previously scheduled for November.

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