The Intel Corporation logo is displayed on a display in a store in Manhattan, New York City, U.S. November 24, 2021. REUTERS Andrew Kelly File Photo
Jan 26 Reuters -- Chipmaker Intel Corp posted record fourth-quarter revenue but forecast first-quarter earnings short of Wall Street expectations, as the world's largest chipmaker faces challenges related to persistent global supply chain problems.
Intel shares, which initially fell about 3% in late trade, recovered some ground after the company expressed confidence in demand for its chips and the ability to manage supply chain constraints.
Chief Executive Officer Patrick Gelsinger said on a conference call that he expected those constraints to continue this year and into next year as the demand for chips continues to grow.
The company forecast first quarter earnings per share of 80 cents, compared to the expectation of 86 cents, according to IBES data from Refinitiv.
Intel's gross margin forecast of 52% fell within a previous range it projected for the next two to three years, but the figure raised concerns.
Kinngai Chan, a senior chip analyst at Summit Insights Group, said with the high capex spend planned, Intel's gross margin could come under more pressure.
Tony Balow, Intel's vice president of investor relations, said that the outlook overshadowed fourth-quarter results, which was a record and surpassed expectations. Revenue in the quarter was $19.5 billion, above the expectation of $18.3 billion and adjusted earnings per share was $1.09, ahead of analysts expectation of 91 cents.
Revenue from Intel's higher-margin data center business increased 20% to $7.3 billion in the latest quarter, a record high for that category. According to FactSet data, analysts on average had expected revenue of $6.73 billion.
There is strong demand across all of our businesses. After the earnings were released, we see superb execution by our factory network, allowing us to meet that demand in this challenging environment," Balow told Reuters.
The company expects first-quarter revenue of $18.3 billion, above analysts' average estimates of $17.62 billion, according to IBES data from Refinitiv.
Even though there is a global semiconductor supply crunch, the forecast places bets on its in-house chip-making capacity to meet strong demand from PC, data center and artificial intelligence markets.
Intel, one of the few semiconductor companies that designs and makes its own chips, is in a better position to weather supply chain challenges.
In the past week, Intel announced it was investing $20 billion for two chip factories in Ohio that could become the world's largest chip making complex with up to eight planned.
Investors are watching how fast Intel ramps up the factories. Some analysts have raised questions of a glut at a time when Intel is competing with Taiwan Semiconductor Manufacturing Co. and Samsung ElectronicsCo. KS is building factories.
It's up to Intel to execute this plan so they can show revenue growth above 10%, which is what they've guided to once the foundry business is up and running, said Logan Purk, an Edward Jones analyst.
Gelsinger said that acute inflation will mean extra chip factory capacity will help balance cost and bring in healthy cashflow.
He also said that Intel could have other spin offs like the Mobileye autonomous vehicle unit that it plans to list this year. Gelsinger said that process was progressing smoothly. "I won't say that's the last one that we'll consider for such moves," Gelsinger said. We think that this is a formula for value creation that could benefit from a purchase from the Intel family as we look to the future.