After the closing bell Tuesday, chip giant Intel Corp. (INTC) reported Q1 earnings results — the second of the major tech firms to report after Oracle (ORCL) a couple weeks ago. Intel reported earnings per share of 41 cents, which beat expectations by a penny. But revenues barely scratched the bottom of the company's guided range and missed expectations of $12.83 billion by roughly $220 million.
This was a further disappointment for investors, because Intel had drastically revised revenue expectations lower on March 12, from $13.7 billion to $12.8 billion. This generated a slew of downward estimate revisions for Intel, sending the company to a Zacks Rank #4 (Sell) and INTC stock down below $32 per share, where it has remained.
The downward guidance explicitly referred to weaker demand for business desktop PCs, of which Intel is a major supplier of chips. This business brought in $7.4 billion during Q1, down roughly 17 percent quarter over quarter. The company would rather tout growth in its Data Center operations, however, which reached $3.7 billion in the quarter — up 19 percent year over year but down 10 percent from Q4 2014.
Revenue guidance for Q2 is also lower than expectations at $13.2 billion; the Zacks consensus before the earnings announcement was for $13.47 billion. So while Intel maintains its string of 6 straight earnings beats, we're suddenly seeing a tapering off in a big way based on lackluster PC sales in the enterprise market.
After-hours trading is looking pretty good, though, so far — INTC is up 3 percent since the earnings report. Perhaps investors feel Intel's bad news had already been baked in; after all, the stock had been down more than 13 percent year to date. Intel has given back much of its big year over year gains, but is still up more than 20 percent from this time last year.
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