The stock of chipmaker Intel Corp. (NASDAQ:INTC) was down sharply after the company reported a 20% drop in its data center revenue and a steep decline in its gross profit margin.
The latest quarterly numbers show that Intel is losing market share to rivals and customers who are designing their own microchips and other components. Intel’s Data Center Group generated first-quarter sales of $5.6 billion U.S., down 20% from a year earlier and below Wall Street estimates.
Intel did report that its personal computer business performed better-than-expected on continued demand for laptops that run Intel processors. The Santa Clara, California-based company also raised its full-year sales forecast slightly. Intel’s personal computer chip division had first-quarter revenue of $10.6 billion U.S., up 8% from a year earlier. Analysts had forecast $10 billion U.S.
However, Intel said its gross margin, the percentage of revenue remaining after deducting the cost of production, was 55.2%, down more than five percentage points from the same period of 2020. Intel has historically delivered margins above 60%.
Amazon and other companies are designing more microchips in-house for their data centers. These businesses have been major Intel customers for years, so the trend is a concern for the company and investors. Intel rival Advanced Micro Devices (NASDAQ:AMD) has also rolled out more competitive data center processors recently.
Intel said sales of chips to cloud service providers fell 29% from the same period a year earlier. That huge drop, according to Intel, was caused by "digestion," which is customers pausing orders while they work through unused stockpiles of chips.
Tech Insider
