Shares fall 7% in after-hours trading as forecast tainted by economic uncertainty, China trade fears
Intel Corp. shares dropped in the extended session Thursday after the chip giant’s quarterly revenue and outlook fell short of Wall Street expectations amid growing concern about trade and economic issues.
Intel INTC, +3.80% shares were last down 6.7% after hours, following a 3.8% gain to close the regular session at $49.76 as chip makers staged a huge rally on strong earnings results. The PHLX Semiconductor Index SOX, +5.73% gained 5.7% in the regular session as the Dow Jones Industrial Average DJIA, -0.09% slipped 0.1% for the day, the S&P 500 index SPX, +0.14% rose 0.1%, and the tech-heavy Nasdaq Composite Index COMP, +0.68% finished up 0.7%. Other chip makers and equipment suppliers also gave back some gains in the extended session.
Intel said it expects adjusted earnings of 87 cents a share on revenue of about $16 billion for the first quarter, and $4.60 a share on revenue of about $71.5 billion for the year.
Analysts were expecting earnings of $1 a share on revenue of $17.29 billion for the first quarter, and $4.51 a share on revenue of $73.11 billion for the full year.
Back in October, Intel had forecast “balanced” headwinds and tailwind on revenue.
“Since that time trade and macro concerns, especially in China, have intensified,” said Bob Swan, Intel’s interim chief executive and chief financial officer, on the conference call.
“Cloud service providers shifted from building capacity to absorbing capacity and the NAND pricing environment has further deteriorated,” Swan said. “Those incremental headwinds are impacting our revenue expectations and slightly reducing our operating margin percentage forecast.”
NAND chips are the flash memory chips used in USB drives and smaller devices, such as digital cameras.
Intel reported fourth-quarter net income of $5.2 billion, or $1.12 a share, compared with a loss of $687 million, or 15 cents a share, in the year-ago period. Adjusted earnings were $1.28 a share. Of the 35 analysts surveyed by FactSet, Intel on average was expected to post adjusted earnings of $1.22 a share, in line with Intel’s forecast. Revenue rose to $18.66 billion from $17.05 billion in the year-ago quarter. Wall Street expected revenue of $19.02 billion from Intel, according to 33 analysts polled by FactSet.
Intel’s revenue miss spread across all of its segments. Data-center group, or DGC, revenue rose 9% to $6.1 billion, while analysts expected $6.35 billion, according to FactSet data. Intel’s largest segment, client-computing or traditional PC, also fell short of Wall Street targets, rising 10% to $9.8 billion, whereas analysts expected $10.01 billion. Nonvolatile memory solutions revenue was $1.1 billion, compared with the Street’s $1.12 billion estimate. “Internet of Things,” or IoT, revenue was $816 million, while the Street forecast $821.8 million.
In the first quarter, Swan said he expects PC-based revenue up in the “low single digits” and data-centric revenue to be “down low single digits on broad weakness in data center and continued NAND pricing pressure.”
In the year-ago first quarter, Intel reported PC-based revenue of $8.2 billion, and “data-centric” revenue — which includes data-center, IoT, nonvolatile memory, and programmable solutions — of $7.5 billion. Analysts expect PC revenue of $8.93 billion and total “data-centric” revenue of $8.02 billion, according to FactSet data.
Swan also said he was “convinced” the board would “close on a new CEO in the near future.” Intel has operated with an interim CEO since last June, when Brian Krzanich stepped down after he was found to have violated company policies through a past relationship with another employee.