Intel recently revealed it generated $19.8 billion in the first quarter of 2020, a figure exceeding the company’s own forecast and Wall Street’s predictions. The firm explained its sales jumped by 23 percent year-over-year because of robust data center and PC chip purchases.
However, the company withdrew its full-year earnings guidance due to “significant economic uncertainty” caused by the coronavirus pandemic.
Intel’s Better-Than-Expected Q1 Results
In the first three months of 2020, Intel brought in $5.7 billion or $1.31 per share in income, up 42 and 51 percent respectively from last year. Bloomberg reports analysts had a consensus first-quarter earnings prediction of $1.23 per share for the chipmaker. Moreover, the company outpaced its Q1 revenue forecast of $19 billion and market watchers expectations of $18.83 billion in sales.
Intel explained its uptick in intake came from a 43 percent surge in server component revenue and a 14 percent surge in computer processor sales. Like many chipmakers, Intel saw an increase in purchases from online service companies straining to compensate for millions of people recently joining the remote workforce to slow the spread of COVID-19.
Similarly, work from home staffers have been upgrading their hardware with Intel products to complete their assignments while under self-quarantine.
The company’s first-quarter success is also due to its resiliency amidst coronavirus pandemic related supply chain disruption. CEO Bob Swan announced last month Intel maintained a “greater than 90 percent” on-time delivery rate despite the outbreak’s spread. The corporation even managed to increase its gross margin by 4 points year-over-year despite global production and logistics volatility.
Uncertain Near and Mid-Term Outlook
Although it navigated the first three months of the COVID-19 pandemic well, Intel expects the global health crisis to harm its operations.
The corporation forecasts generating $18.5 billion in revenue and earnings of $1.04 per share in the current quarter. The firm’s near-term outlook fell short of analysts’ net income expectations of $1.11 per share against $18.08 billion in sales. The manufacturer also pulled its 2020 sales estimate because of the coronavirus’s destabilizing effect on the global economy.
In an earnings call, Intel CFO George Davis said the COVID-19 prompted recession has hurt the firm’s Internet of Things and automotive chips sales. The executive also noted the company’s PC component revenue would also take a hit as worldwide economic conditions worsen.
However, the world’s largest semiconductor company has taken steps to ensure it will weather the storm. Davis revealed the chipmaker recently took on $10.3 billion in debt to bolster its liquidity. The corporation also suspended its stock buyback program last month and recently secured a four-year contract with the Defense Department.
Intel’s uncertain near and mid-term outlook is worrying and justified. But the firm’s ability to react quickly and decisively in the face of adversity bodes well for its long-term prospects.