Intel beats estimates but stock falls after dip in data centre sales

23 Apr 2021

Image: © MichaelVi/Stock.adobe.com

With a mixed start to 2021 and an ongoing chip shortage to contend with, Intel’s new CEO says it will be a ‘pivotal year’ for the company.

Chip giant Intel had a mixed start to 2021, seeing strong PC demand but a dip in its data centre sales.

Revenue was largely flat in the first quarter of the year, falling 1pc to $19.7bn. While this exceeded the company’s estimates, Intel stock was down by more than 3pc after the quarterly earnings report was released.

Intel’s client computing group, which is the company’s largest business unit, saw revenue rise 8pc to $10.6bn. Volumes in its PC unit were up 38pc compared to this quarter last year and notebook volumes set a new record.

Mobileye, its self-driving car business, also saw revenue rise 48pc to a record $377m.

However, there was a sharp drop in revenue in the company’s data centre group, which is one of its most profitable units. Sales here fell by 20pc to $5.6bn and, overall, gross profit margin slipped to 55.2pc. It comes as the company faces increased competition from rivals AMD and Nvidia.

A ‘pivotal year’ for Intel

This was the first quarterly report for new Intel CEO Pat Gelsinger, who took over from Bob Swan in February of this year.

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It was also Intel’s first quarterly report after announcing ambitious plans for boosting manufacturing. The chipmaker revealed last month that these plans involve an ongoing $7bn expansion at its site in Co Kildare, as well as a $20bn investment in two new fabrication facilities in Arizona.

Gelsinger said in the earnings update yesterday (22 April) that the response to the new strategy has been “extraordinary”.

“Our product roadmap is gaining momentum, and we’re rapidly progressing our plans with reinvigorated focus on innovation and execution,” he added.

“This is a pivotal year for Intel. We are setting our strategic foundation and investing to accelerate our trajectory and capitalise on the explosive growth in semiconductors that power our increasingly digital world.”

But Gelsinger has also said that the global chip shortage, which is currently affecting everything from electronics to the auto industry, will continue until more capacity comes online to meet demand.

“This will take a while until people can put more capacity in the ground,” he said in an interview with the Wall Street Journal. “It’s just the way it is when you’re building new factories.”

With growth plans in motion, Intel has raised its full-year guidance and is now expecting revenue of $72.5bn in 2021. The company saw record revenue last year, with sales up 8pc to $77.9bn, thanks in part to strong PC sales and demand for its processors.

Sarah Harford is sub-editor of Silicon Republic

editorial@siliconrepublic.com