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Report: Chipmaker, Intel surprises with Profit and raises forecast as PC market decline slows down

Intel, the global chipmaker surprised investors with a quarterly profit, benefiting from a relief in the PC market slump.

According to Reuters, “As the demand for personal computers declined due to consumers having already purchased machines during the pandemic, inventories piled up.”

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However, this glut is starting to ease, with PC shipments showing an 11.5% drop in the June quarter compared to a drastic 30% decline in the two previous quarters, as reported by Canalys data.

This improvement in the PC market has encouraged Intel to forecast better margins for the third quarter.

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Although their recent profit margins were considerably lower than historical highs, Intel expressed optimism, expecting margins to improve in the latter half of the year.

“The positive performance in desktop sales significantly contributed to Intel’s outperformance, according to Edward Snyder, an analyst at Charter Equity Research,” Reuters reported.

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The company’s stock experienced a significant rally, increasing its market value by nearly $9 billion.

“Intel has struggled to keep up with rivals such as Nvidia, Advanced Micro Devices (AMD), and Broadcom, whose market values have surpassed Intel’s in recent years.”

In its foundry business, responsible for manufacturing chips for other companies, Intel reported revenue of $232 million, up from $57 million in the previous year.

Intel’s Chief Executive Officer (CEO), Pat Gelsinger, attributed part of this increase to “advanced packaging,” a process where Intel combines components of chips made by other companies to create more powerful chips, which is gaining considerable interest in the industry for high-performance computing and AI applications.

“However, Intel’s data centre and artificial intelligence business experienced a 15% decline in sales, reaching $4 billion compared to $4.7 billion in the year-ago quarter. Despite beating Wall Street estimates, the company faces challenges in the AI segment, especially as cloud giants like Microsoft and Alphabet plan to increase spending on data centres, primarily benefiting Nvidia, a major player in AI chip production.”

Intel acknowledges that it’s been losing its share in the server CPU market and is currently striving for relevance in AI computing.

The company anticipates a modest decline in data centre chip sales for the third quarter, followed by a recovery in the fourth quarter.

Looking ahead, Intel forecasts adjusted current-quarter earnings per share of 20 cents, surpassing the estimated 16 cents by analysts.

“The company expects adjusted revenue to range from about $12.9 billion to $13.9 billion, with the midpoint exceeding estimates but still implying a 12.6% drop in business compared to the previous year.”

Despite challenges, Intel remains positive about the industry’s recovery and has seen its shares rise approximately 30% since the beginning of the year, even as the Philadelphia SE Semiconductor index experienced a 50% increase, driven by optimistic expectations for the semiconductor industry.

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Diana Mutheu
Diana Mutheu
Diana Mutheu is a Tech enthusiast, happy to delve deeper into the African tech space covering Social Media, AI, Startups, Telcos, Cryptocurrency, Big Data, Women in Tech and all matters Tech.

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