TRANSFORMED:
Lip-Bu Tan said that Intel is a fundamentally different company compared with last year, when he became chief executive officer, due to AI demand
Intel Corp on Thursday delivered a blockbuster sales forecast that shattered Wall Street expectations, signaling that the long-struggling chipmaker is benefiting from the giant build-out of artificial intelligence (AI) computing.
Revenue is expected to be US$13.8 billion to US$14.8 billion in the June quarter, the company said on in a statement. Analysts estimated US$13 billion on average, data showed.
Intel shares soared 20 percent in extended trading after the results were released, putting the stock in record territory. It had gained 81 percent this year heading into the report, closing at US$66.78.
Photo: Ann Wang, Reuters
The upbeat outlook suggests that chief executive officer Lip-Bu Tan (陳立武) is making progress on a challenging comeback plan. After lining up major investments in Intel last year — helping to strengthen the company’s balance sheet — he is delivering on a promise to improve operations.
“Everyone is starting to direct orders to Intel, and I think we are in the early days,” said Great Hill Capital chairman Thomas Hayes, an Intel investor. “This has gone from despondency to euphoria in a very short period of time.”
The earnings report shows that the need for data center chips to power the massive AI expansion is lifting demand for Intel’s flagship Xeon server processors.
That type of semiconductor — the central processing unit — is a renewed focus for companies trying to turn their AI software into services that bring in revenue.
In an interview, Tan said Intel delivered a “solid result” that was ahead of its projections.
He expects the strong demand for processors used in AI systems to expand and said the company is “laser-focused” on increasing output from Intel’s factories, which still cannot produce enough to fill all its orders.
“There is huge demand,” Tan said. “We are working very hard with our team to make sure we deliver, that we meet that demand, but we are still short because the demand keeps increasing from the customers.”
For now, Intel has been able to navigate another challenge the PC industry is facing: shortages of memory chips.
In addition to making progress on production, Tan has restored Intel’s balance sheet via outside investments — to the point where the company bought back part of a factory in Ireland that it had been forced to sell to raise cash.
Second-quarter earnings would be about US$0.20 a share, excluding some items, Intel said. That compares with a Wall Street prediction of US$0.09.
In the first quarter, which ended on March 28, revenue rose 7 percent to US$13.6 billion. Profit was US$0.29 a share, excluding some items. Analysts, on average, had estimated sales of US$12.4 billion and earnings of US$0.01, data showed.
Gross margin, the percentage of revenue remaining after deducting the cost of production, was 41 percent in the quarter on an adjusted basis. When Intel was at the height of its powers, it regularly reported margins north of 60 percent. It predicted a margin of 39 percent for the current quarter.
Intel would spend more than originally budgeted on new production equipment, chief financial officer Dave Zinsner said.
Tan said Intel is a “fundamentally different company” compared with last year, when he became chief executive officer.
“A year ago, the conversation about Intel was about whether we could survive,” he said.
“Today, it’s about how quickly we can add manufacturing capacity and scale our supply to meet the enormous demand for our products,” he added.
