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Earnings Results: Intel stock plummets on disappointing earnings outlook as new CEO describes ‘more cautious’ trend

Intel Corp. shares dropped in the extended session Thursday after the chip giant’s outlook fell way below Wall Street estimates offsetting an earnings beat. Read More...

Intel Corp. shares plummeted as much as 9% in the extended session Thursday after the chip giant’s outlook fell way below Wall Street estimates, offsetting an earnings beat, and a decline in data-center revenue was worse than expected.

Intel INTC, -1.89%  said it expects adjusted earnings of 89 cents a share on revenue of about $15.6 billion for the second quarter, while analysts polled by FactSet had forecast earnings of $1.01 a share on revenue of $16.86 billion. For the year, the chip maker sees adjusted earnings of $4.35 a share on revenue of about $69 billion. Analysts had forecast $4.50 a share on revenue of $71.04 billion.

“Our conversations with customers and partners across our PC and data-centric businesses over the past couple months have made several trends clear,” Intel Chief Executive Bob Swan said on the conference call.

“The decline in memory pricing has intensified, the data-center inventory and capacity digestion that we described in January is more pronounced than we expected, and China headwinds have increased, leading to a more cautious IT spending environment,” Swan said. “And yet those same customer conversations reinforce our confidence that demand will improve in the second half.”

The company reported first-quarter net income of $3.97 billion, or 87 cents a share, compared with $4.45 billion, or 93 cents a share, in the year-ago period. Adjusted earnings were 89 cents a share. Revenue declined to $16.06 billion from $16.07 billion in the year-ago quarter. Analysts had forecast adjusted earnings of 87 cents a share on revenue of $16.03 billion, according to FactSet.

Data-center revenue, however, declined more than expected, down 6% to $4.9 billion, when analysts were expecting a 2.5% decline to $5.1 billion, according to FactSet data. The company said that cloud segment sales grew 5% but communications service provider sales declined 4% and enterprise and government revenue declined 21%.

Intel’s largest segment, client-computing, or traditional PC, rose 4% to $8.6 billion, while Wall Street forecast a rise of 1.9% to $8.38 billion from the year-ago period.

On the call, George Davis, Intel’s new chief financial officer, said the company expects second-quarter data-center sales to be flat sequentially and PC-segment sales to decline in the high single digits. Analysts had forecast data-center sales of $5.58 billion for the second quarter, and PC-segment sales of $8.68 billion.

Nonvolatile memory solutions revenue fell 12% to $915 million in the first quarter, while Wall Street had expected a 9.4% decline to $942.1 million. On the other hand, “Internet of Things,” or IoT, revenue rose 8% to $910 million in the first quarter, while analysts had forecast a 6% decline to $789.5 million.

Intel shares dropped about 9% in immediate after-hours trading, following a 1.9% decline to close the regular session at $57.61. In comparison, the PHLX Semiconductor Index SOX, -1.81%  finished down 1.8%, breaking a six-session streak of record high closings.

In the broader market, the Dow Jones Industrial Average DJIA, -0.51%  declined 0.5% Thursday, the S&P 500 index SPX, -0.04%  fell less than 0.1%, and the Nasdaq Composite Index COMP, +0.21% rose 0.2%.

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