Intel Reports Profit Surge But Warns of Further Delays on Advanced Chips -- Update

By Asa Fitch 

Intel Corp. reported stronger earnings in the second quarter, buttressed by a work-from-home economy that spurred demand for computing power, but its shares tumbled in after-hours trading when it signaled a delay in its development of superfast chips.

Intel said Thursday its profit in the April-June period rose 22% from a year ago to $5.11 billion. Earnings per share were $1.19, rising from 92 cents a share last year and exceeding forecasts from analysts surveyed by FactSet. On an adjusted basis, EPS also rose to $1.23.

Second-quarter revenue rose more than 19% from a year earlier to $19.73 billion, coming in ahead of analysts' estimates.

But Intel revealed further delays of its seven-nanometer chip technology that underlies future generations of central processing units. The technology, Intel said, is now trending roughly 12 months behind internal targets.

Shares fell more than 8% in after-hours trading.

Santa Clara, Calif.-based Intel was among companies that withdrew its full-year earnings guidance amid the coronavirus pandemic. But tech companies -- and the chip industry in particular -- have shown resilience because their products underpin the tools people are turning to for remote work, school and staying in touch with family.

Thursday, Intel reinstated its full-year guidance and gave an outlook for the current quarter. Intel said it expects third-quarter revenue of roughly $18.2 billion, higher than the $17.92 billion analysts were forecasting.

For the full year, Intel projected sales of $75 billion, which was higher than the $73.5 billion it previously forecast.

Despite those healthy sales, Intel's future isn't entirely secure. The company could lose a chunk of its processor sales -- amounting to roughly 3% of annual revenue, analysts say -- when Apple Inc. shifts away from Intel chips in its Mac computers to its own designs starting later this year.

And while Intel has struggled to move into mass production of its most advanced chips, rival chip maker Advanced Micro Devices Inc. has been challenging the company's dominance. AMD's market share in PC CPUs climbed above 17% in the first quarter, more than doubling from five years ago, according to Mercury Research. Intel holds almost all of the remaining market share.

Following Intel's earnings release, AMD's shares rose about 6% after hours. AMD is scheduled to release its second-quarter earnings report July 28.

Even before the pandemic led to a demand surge, Intel had been adding manufacturing capacity to address a shortage of its chips that led to an unusual apology letter sent to PC-maker customers in November. Chief Financial Officer George Davis said Thursday the company was on track to resolve its supply issues in the latter half of the year.

"We think we're going to be able to supply and claw back share and end the year with strong share growth in PCs," he said in an interview.

Write to Asa Fitch at [e-mail]

(END) Dow Jones Newswires

July 23, 2020 17:29 ET (21:29 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.