Intel stock falls despite earnings beat, as data-center sales slump more than 20%

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Intel Corp. shares fell in the extended session Thursday despite a big earnings beat and raised annual guidance, as a large dip in data-center sales was papered over by strength in sales of personal computers and a departing memory business.

Intel INTC, -1.77% reported first-quarter net income of $3.4 billion, or 82 cents a share, compared with $5.66 billion, or $1.31 a share, in the year-ago period. After adjusting for more than $2.2 billion for restructuring and other efforts, as well as other adjustments, Intel reported earnings of $1.39 a share, compared with $1.45 a share from a year ago.

Revenue declined to $19.7 billion from $19.83 billion in the year-ago quarter, for a third straight quarter of year-over-year revenue declines, but came in much higher than expected. Analysts surveyed by FactSet had estimated adjusted earnings of $1.15 a share on revenue of $17.79 billion, while Intel had forecast adjusted earnings of $1.10 a share on revenue of about $17.5 billion. Intel also noted that revenue after removing results from the memory business it is in process of selling was $18.6 billion, still well higher than analyst estimates.

Shares fell about 2% in after-hours trading, following a 1.8% decline in the regular session to close at $62.57. 

“This is a pivotal year for Intel,” Intel Chief Executive Pat Gelsinger said in a statement with his first earnings report since officially taking over. “We are setting our strategic foundation and investing to accelerate our trajectory and capitalize on the explosive growth in semiconductors that power our increasingly digital world.”

Gelsinger dropped into the conference call after Intel’s last earnings report to detail his plans for the chip maker, and then gave more specifics in an event last month after taking the helm. He is expected to provide additional information on a conference call Thursday afternoon, scheduled for 5 p.m. Eastern time.

For more: How did Intel lose its Silicon Valley crown?

In that presentation, Gelsinger provided full-year guidance for Intel, but the chip maker has already decided to push that forecast higher. Intel predicted Thursday annual revenue of approximately $77 billion, or $72.5 billion without the memory business, and adjusted earnings of $4.60 a share. Gelsinger had previously targeted $4.55 a share on sales of $76.5 billion.

For the second quarter, Intel forecast revenue of $18.9 billion, or $17.8 billion when removing the memory business, and GAAP and non-GAAP earnings of $1.05 a share. Analysts on average expected adjusted second-quarter earnings of $1.09 a share on revenue of $17.55 billion.

Intel’s data-center group saw revenue fall more than 20% to $5.56 billion, while analysts expected $5.89 billion. Intel is facing increased competition from rival Advanced Micro Devices Inc. AMD, -3.12% and GPU specialist Nvidia Corp. NVDA, -3.32% in the data-center category.

See also: Nvidia steps up competition with Intel and AMD with first data-center CPU

Intel’s largest segment — client-computing, the traditional PC group — grew more than 8% to $10.6 billion, with analysts expecting $10.17 billion. Intel reported that nonvolatile memory solutions revenue declined slightly to $1.11 billion, far surpassing Wall Street’s expectations of $563.8 million. “Internet of Things,” or IoT, revenue rose to $914 million, compared with an expected $774.9 million. Mobileye revenue was $377 million, while the Street had expected $332.3 million.

Over the past 12 months, Intel shares have gained nearly 5%, while the Dow Jones Industrial Average DJIA, -0.94% — which counts Intel as a component — has gained 45%, the S&P 500 index SPX, -0.92% has grown 49%, the tech-heavy Nasdaq Composite Index COMP, -0.94% has surged 64%, and the PHLX Semiconductor Index SOX, -2.31% has ballooned 88%.

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