: Intel stock sinks as boom in earnings is not expected to last

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Intel Corp. revealed Thursday afternoon that earnings and revenue spiked well above expectations in the first quarter, but predicted that profit would come in lower than projections in the second quarter, sending shares down in after-hours trading.

Intel INTC, -1.76% reported first-quarter net income of $5.66 billion, or $1.31 a share, compared with $3.97 billion, or 87 cents a share, in the year-ago period. Adjusted earnings were $1.45 a share, compared with 89 cents a share in the year-ago period.

Revenue jumped roughly 23% to $19.8 billion from $16.06 billion in the year-ago quarter; Intel’s quarterly revenue topped $20 billion for the first time in the fourth quarter.

Analysts surveyed by FactSet had projected earnings of $1.28 a share on revenue of $18.67 billion on average.

Intel has suspended stock repurchases and issued $8 billion in debt since COVID-19 began to sweep across the globe, but had not rescinded financial guidance like many other large companies. Analysts have suggested that the company stands to benefit in the short term from the pandemic, as the need for laptops and cloud-computing power to support workers moving home from the office is thought to have spurred sales of its core PC and server chips.

Intel in the age of COVID-19: Intel could experience sales surge due to coronavirus, but ‘all bets are off’ after that

In Thursday’s report, Intel provided second-quarter guidance for adjusted earnings of $1.10 a share on sales of about $18.5 billion. Analysts on average were expecting lower sales but higher profit, according to FactSet, which reports expectations of adjusted earnings of $1.20 a share on sales of $17.79 billion.

Intel said it sees strong data-center demand in the first half of the year, and expects weak enterprise and government demand in the second half of the year.

“We expect that demand for the cloud folks, the strong demand, to continue and possibly even going into the second half of the year,” said Bob Swan, Intel chief executive, on the conference call. “That’s a TBD, but the trends are relatively encouraging. The demand signals are very high.”

Sales from auto, industrial and retail customers are also down, Intel said, while PC demand is high because of work- and learn-from-home initiatives.

“Like other tech giants, Intel pulled its annual guide, but it did keep it for Q2, which I thought was pretty good,” said Patrick Moorhead, principal analyst at Moor Insights & Strategy, in emailed comments.

For the first quarter, Intel’s data-center group, or DCG, revenue jumped 43% to $7 billion, while analysts expected it to rise 29% to $6.32 billion. Intel’s largest segment — client computing, the traditional PC group — rose 14% to $9.8 billion, with analysts expecting a 8.8% rise to $9.34 billion from a year ago.

Intel follows other semiconductor companies that have revealed earnings in recent days, but precedes rival Advanced Micro Devices Inc. AMD, -0.03%. Texas Instruments Inc. TXN, -1.35% reported earnings that topped Wall Street estimates Tuesday and said it was using the 2008 financial crisis as a playbook for formulating its outlook for the second quarter, noting it expects strong PC and server sales and weak auto and industrial sales. AMD reports earnings on April 28 after the market close.

Intel shares sank more than 5% in after-hours trading immediately following the release, after declining 1.8% in the regular session, a decline that intensified after Bloomberg News reported that Apple Inc. AAPL, -0.38% is prepping its own semiconductors for Mac computers.

Of the 44 analysts who cover Intel, 16 have buy or overweight ratings on the stock, while 23 have hold ratings and five have sell or underweight ratings, with an average share-price target of $64.25.

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