Why Intel Shares Crashed After-Hours Today

Intel Corporation INTC shares fell steeply in after-hours trading on Thursday, by 8.75%, to $51.10 after closing the regular session 1.14% higher at $56.

What Happened:  The decline in shares came after the chipmaker attributed its computer chip business declining 2% during the third quarter ended October to the ongoing chip shortage.

Adjusted Earnings per share during Q3 were reported at $1.71, beating an estimate of $1.11. Adjusted revenue came in at $18.1 billion, missing an estimate of $18.24 billion.

The company’s Client Computing Group business declined 2% year-over-year to $9.7 billion, which includes revenue from computer chips.

“We call it match sets, where we may have the CPU, but you don't have the LCD, or you don't have the Wi-Fi,” said Intel CEO Pat Gelsinger, CNBC reported.

“Data centers are particularly struggling with some of the power chips and some of the networking or ethernet chips.”

The CEO noted the strong demand for personal computers and said the semiconductor shortage would continue until 2023, as per CNBC.

“We do think the PC business is now just structurally larger, a million units-a-day kind of business.”

See Also: How To Buy Intel (INTC) Shares

Why It Matters: Even though Intel’s earnings for Q3 beat estimates, the company’s outlook on the current quarter and foreseeable future soured investor mood on the company.

The company expects $18.3 billion in adjusted sales in Q4 compared with analyst expectations of $18.24 billion, as per CNBC.

Intel said Thursday that its gross margin and free cash flow would fall to a lower level over the next two or three years as it invests more in research and development and funds new factories.

Adding to Intel’s problems is the fact that its offerings are not competitive as it has faced repeated delays in scaling up to the latest manufacturing technologies, according to a Bloomberg report.

This, in turn, has empowered competitors Advanced Micro Devices, Inc AMD and Apple Inc TSLA — both foundry clients of Taiwan Semiconductor Manufacturing Company Limited TSM.

Meanwhile, Apple has been replacing more of Intel’s chips in its higher-end Pro line of Macbook computers, a move termed as a “game changer” by Wedbush analyst Daniel Ives.

In an interview this month with CRN, Gelsinger said that AMD’s lead has come to an end with the launch of Alder Lake client CPUs due for launch this fall and the Sapphire Rapids server CPUs slated for launch next year.

However, analysts are bullish on AMD as it closes the gap with Intel with its Ryzen 5000 series of desktop CPUs based on the new Zen 3 architecture.

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