Intel returned to net profit in the second quarter

Intel net income

Intel, which reported for Q2 2023 on Thursday, 27 July, gave a pleasant surprise to its shareholders. The company was able to return to net profit for the April-June quarter, recording an adjusted EPS of $0.13 versus the market’s expectations of $0.03. Revenue, down 15.5% (YoY), also came in above consensus ($12.9bn vs. $12.1bn) and the company’s forecast of $12.5bn for the quarter.

The company reported a rebound in revenue from Q1 results in almost all divisions (except for the networking platform group), driven by industry-wide sales growth. In particular, InteI’s key segment, the consumer PC group, reported a 17.6 per cent (q/q) increase in sales, while Gartner had previously reported a quarterly global PC shipment increase of 8.2 per cent.

An additional factor supporting Intel’s revenue was the surge in demand for AI chips, which also strengthened gross margin to 35.8%, which was only slightly lower than the Q2 2022 figure (36.5%). Intel’s production cost optimisation programme launched late last year also contributed. Gross profit still does not yet outweigh Intel’s operating expenses (EBIT $ – 1.0bn), but we are encouraged by the reported 24% (YoY) drop in administrative and marketing expenses.

Management comments on the results were also generally optimistic. Intel continues to expect an accelerated recovery of the global PC market in 2H, and the release of new products, in particular the fifth-generation Emerald Rapids server processors (Xeon family), according to the CEO, will be in line with the previously announced timeline (Q4 2023). For Q3, the company expects further revenue growth to $12.9bn – $13.9bn, as well as an increase in gross margin to 39.1% and EPS to $0.2.

We view Intel’s results positively and put the stock on ‘review’ to reflect the improved outlook on the company’s financial metrics.

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