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Intel Corporation (INTC - Free Report) reported relatively modest first-quarter 2022 results, wherein both the bottom and top lines beat the respective Zacks Consensus Estimate. The company reaffirmed its earlier guidance despite short-term headwinds. It expects demand to pick up in the second half of the year.
Quarter Details
The company reported GAAP net income of $8,113 million or $1.98 per share in first-quarter 2022 compared with $3,361 million or 82 cents per share in the year-ago quarter. The significant improvement, despite top-line contraction, was primarily attributable to lower operating expenses and gain on equity investments. Non-GAAP earnings in the reported quarter were $3,586 million or 87 cents per share compared with $5,489 million or $1.34 per share a year ago. Despite the year-over-year decline, non-GAAP earnings exceeded both the company guidance and the Zacks Consensus Estimate by 7 cents each.
GAAP revenues were $18,353 million, down 6.7% year over year, owing to softness in end consumer and educational market demand. In addition, the company witnessed lower sales from Russia and Belarus as it stopped shipping in these countries due to U.S. sanctions. Non-GAAP revenues totaled $18,353 million compared with $18,566 million in the year-earlier quarter. The top line surpassed the consensus estimate of $18,320 million.
Intel Corporation Price, Consensus and EPS Surprise
Intel has reorganized its business segments to better reflect the growth in both large traditional markets and high-growth emerging markets for increased transparency, focus and accountability.
Client Computing Group (CCG, 50.6% of total revenues) revenues were down 13% year over year to $9,294 million. Lower notebook volumes due to component shortage hurt top-line growth. In addition, lower revenues on ramp down of Apple CPU and modem business, lower demand from entry-level consumer and education market and OEM inventory burn affected segment sales.
Datacenter and AI Group (DCAI, 32.9%) revenues increased 22% year over year to $6,034 million, driven by the strength of Xeon processors from hyperscale and enterprise customers. Network and Edge Group (NEX, 12.1%) revenues improved 23% to $2,213 million on solid cloud networking demand and edge computing.
Revenues from Accelerated Computing Systems and Graphics Group (AXG, 1.2%) were up 21% to $219 million, buoyed by Alchemist and Super Compute product ramp ups, while that from Mobileye (2.1%) were up 5% to $394 million due to solid auto production. Intel Foundry Services (IFS, 1.5%) revenues improved 175% to $283 million, driven by increased tool deliveries and automotive revenues.
Other Operating Details
Non-GAAP gross margin was 53.1%, down 570 basis points (bps) on a year-over-year basis. Non-GAAP research and development and marketing, general and administrative expenses increased to $5.5 billion from $4.4 billion. Non-GAAP operating margin contracted 1200 bps year over year to 23.1%.
CCG operating income was down 34% year over year to $2,827 million, while DCAI operating income was down 1% to $1,686 million. NEX operating income improved to $366 million from $243 million, while Mobileye’s operating income declined to $148 million from $171 million a year ago.
Cash Flow & Liquidity
As of Apr 2, 2022, Intel had cash and cash equivalents of $6,215 million, with $32,788 million of long-term debt. The company generated $5,891 million of cash from operations in the quarter compared with $5,348 million in the prior year.
Outlook
For the second quarter of 2022, Intel expects non-GAAP revenues to be around $18 billion. Non-GAAP gross margin is likely to be 51%. Non-GAAP earnings are expected to be 70 cents per share.
For 2022, the company reiterated its earlier guidance and expects non-GAAP revenues to be around $76 billion. Non-GAAP gross margin is likely to be 52%. Non-GAAP earnings are expected to be $3.60 per share. Although the company expects softness in end consumer and educational market demand to continue in the second quarter, it expects demand to pick up in the second half of the year. In addition, lower sales from Russia and Belarus along with new lockdown restrictions in China are likely to affect the top line in the second quarter. However, the headwinds are expected to gradually wane as the year progresses.
Nokia Corporation (NOK - Free Report) , carrying a Zacks Rank #2 (Buy), is a solid pick for investors in the industry. Earnings estimates for the current year for the stock have moved up 40% since April 2021.
Nokia pulled off a trailing four-quarter earnings surprise of 205.2%, on average and has a long-term earnings growth expectation of 10.4%. It has moved up 7.9% in the past year. Nokia is well-positioned for the ongoing technology cycle, given the strength of its end-to-end portfolio. The company’s deal win rate is encouraging, with notable successes in the key 5G markets of the United States and China.
Viasat, Inc. (VSAT - Free Report) , carrying a Zacks Rank #2, is another key pick. It pulled off a trailing four-quarter earnings surprise of 129.9%, on average. The company attracts millions of U.S. consumers and enterprises with its high-quality broadband service.
Viasat’s impressive bandwidth productivity sets it apart from conventional and lower-yield satellite providers that run on incumbent business models. Viasat has a competitive advantage in bandwidth economics, global coverage, flexibility and bandwidth allocation, making it believe that mobile broadband will act as a profit churner.
KVH Industries, Inc. (KVHI - Free Report) , a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.
Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be room for cash flow expansion.
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Intel (INTC) Beats Q1 Earnings Estimates Despite Soft Revenues
Intel Corporation (INTC - Free Report) reported relatively modest first-quarter 2022 results, wherein both the bottom and top lines beat the respective Zacks Consensus Estimate. The company reaffirmed its earlier guidance despite short-term headwinds. It expects demand to pick up in the second half of the year.
Quarter Details
The company reported GAAP net income of $8,113 million or $1.98 per share in first-quarter 2022 compared with $3,361 million or 82 cents per share in the year-ago quarter. The significant improvement, despite top-line contraction, was primarily attributable to lower operating expenses and gain on equity investments. Non-GAAP earnings in the reported quarter were $3,586 million or 87 cents per share compared with $5,489 million or $1.34 per share a year ago. Despite the year-over-year decline, non-GAAP earnings exceeded both the company guidance and the Zacks Consensus Estimate by 7 cents each.
GAAP revenues were $18,353 million, down 6.7% year over year, owing to softness in end consumer and educational market demand. In addition, the company witnessed lower sales from Russia and Belarus as it stopped shipping in these countries due to U.S. sanctions. Non-GAAP revenues totaled $18,353 million compared with $18,566 million in the year-earlier quarter. The top line surpassed the consensus estimate of $18,320 million.
Intel Corporation Price, Consensus and EPS Surprise
Intel Corporation price-consensus-eps-surprise-chart | Intel Corporation Quote
Segment Performance
Intel has reorganized its business segments to better reflect the growth in both large traditional markets and high-growth emerging markets for increased transparency, focus and accountability.
Client Computing Group (CCG, 50.6% of total revenues) revenues were down 13% year over year to $9,294 million. Lower notebook volumes due to component shortage hurt top-line growth. In addition, lower revenues on ramp down of Apple CPU and modem business, lower demand from entry-level consumer and education market and OEM inventory burn affected segment sales.
Datacenter and AI Group (DCAI, 32.9%) revenues increased 22% year over year to $6,034 million, driven by the strength of Xeon processors from hyperscale and enterprise customers. Network and Edge Group (NEX, 12.1%) revenues improved 23% to $2,213 million on solid cloud networking demand and edge computing.
Revenues from Accelerated Computing Systems and Graphics Group (AXG, 1.2%) were up 21% to $219 million, buoyed by Alchemist and Super Compute product ramp ups, while that from Mobileye (2.1%) were up 5% to $394 million due to solid auto production. Intel Foundry Services (IFS, 1.5%) revenues improved 175% to $283 million, driven by increased tool deliveries and automotive revenues.
Other Operating Details
Non-GAAP gross margin was 53.1%, down 570 basis points (bps) on a year-over-year basis. Non-GAAP research and development and marketing, general and administrative expenses increased to $5.5 billion from $4.4 billion. Non-GAAP operating margin contracted 1200 bps year over year to 23.1%.
CCG operating income was down 34% year over year to $2,827 million, while DCAI operating income was down 1% to $1,686 million. NEX operating income improved to $366 million from $243 million, while Mobileye’s operating income declined to $148 million from $171 million a year ago.
Cash Flow & Liquidity
As of Apr 2, 2022, Intel had cash and cash equivalents of $6,215 million, with $32,788 million of long-term debt. The company generated $5,891 million of cash from operations in the quarter compared with $5,348 million in the prior year.
Outlook
For the second quarter of 2022, Intel expects non-GAAP revenues to be around $18 billion. Non-GAAP gross margin is likely to be 51%. Non-GAAP earnings are expected to be 70 cents per share.
For 2022, the company reiterated its earlier guidance and expects non-GAAP revenues to be around $76 billion. Non-GAAP gross margin is likely to be 52%. Non-GAAP earnings are expected to be $3.60 per share. Although the company expects softness in end consumer and educational market demand to continue in the second quarter, it expects demand to pick up in the second half of the year. In addition, lower sales from Russia and Belarus along with new lockdown restrictions in China are likely to affect the top line in the second quarter. However, the headwinds are expected to gradually wane as the year progresses.
Zacks Rank & Stocks to Consider
Intel currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Sell) stocks here.
Nokia Corporation (NOK - Free Report) , carrying a Zacks Rank #2 (Buy), is a solid pick for investors in the industry. Earnings estimates for the current year for the stock have moved up 40% since April 2021.
Nokia pulled off a trailing four-quarter earnings surprise of 205.2%, on average and has a long-term earnings growth expectation of 10.4%. It has moved up 7.9% in the past year. Nokia is well-positioned for the ongoing technology cycle, given the strength of its end-to-end portfolio. The company’s deal win rate is encouraging, with notable successes in the key 5G markets of the United States and China.
Viasat, Inc. (VSAT - Free Report) , carrying a Zacks Rank #2, is another key pick. It pulled off a trailing four-quarter earnings surprise of 129.9%, on average. The company attracts millions of U.S. consumers and enterprises with its high-quality broadband service.
Viasat’s impressive bandwidth productivity sets it apart from conventional and lower-yield satellite providers that run on incumbent business models. Viasat has a competitive advantage in bandwidth economics, global coverage, flexibility and bandwidth allocation, making it believe that mobile broadband will act as a profit churner.
KVH Industries, Inc. (KVHI - Free Report) , a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.
Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be room for cash flow expansion.