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Intel Earnings Poised to Feel Sting From PC Slump

Chip maker

Intel Corp.

INTC -1.17%

is expected to report lower sales for a second straight quarter, reflecting a slump in personal-computer purchases after two years of strong pandemic-era demand.

Sales in the second quarter are poised to fall 8.6% from the year-earlier period to $18.07 billion, according to analysts surveyed by FactSet. The decline would be the steepest in more than a decade. Wall Street projects Intel will report net profit of $2.19 billion, or a slump of 57% from the year-earlier quarter.

Higher interest rates and inflation have hit consumers’ pocketbooks around the world, and the return to in-person work has softened demand for PCs that people bought in droves over the past two years to facilitate remote work and distance schooling.

Intel is expected to generate revenue of $18.56 billion in the current quarter, down 3.4% from the year-prior period.

As markets react to inflation and high interest rates, technology stocks are having their worst start to a year on record. WSJ’s Hardika Singh explains why the sector — from tech giants to small startups — is getting hit so hard. Illustration: Jacob Reynolds

America’s largest chip maker by sales also is having to grapple with other market disruptions. Consumer spending cooled in May in the U.S., according to the most recent government data, and an economic slowdown has been under way since the beginning of the year. Europe’s growth forecast for this year has slowed amid Russia’s invasion of Ukraine, and Chinese growth has been hindered by Covid lockdowns.

Chip makers less directly exposed to fluctuations in consumer demand have reported stronger results in recent quarters. Pent-up demand for cars, coupled with a shift toward electric vehicles that gobble up more semiconductors than their gas-powered counterparts, helped boost earnings at car-chip maker

NXP Semiconductors

NV this week.

Texas Instruments Inc.

on Tuesday also reported results above Wall Street estimates. Alongside their automotive businesses, both companies sell to industrial customers who have been less hard-hit by consumer weakness.

Intel executives had warned that the second quarter wasn’t shaping up as strongly as they initially expected. Chief Financial Officer

David Zinsner

said in June that headwinds for the business were “much worse than what we had anticipated coming into the quarter.”

The demand pullback comes as Intel is trying to remake itself under Chief Executive

Pat Gelsinger.

Since taking the reins last year, Mr. Gelsinger has set an ambitious course for Intel to regain a technology edge on other chip producers that surpassed it in the race to make the fastest chips with the smallest transistors.

He’s also trying to turn the company into a major contract chip maker, producing semiconductors for others. That business, which recently signed up Taiwanese smartphone-chip maker

MediaTek Inc.

as a customer, aims to compete with

Taiwan Semiconductor Manufacturing Co.

and

Samsung Electronics Co.

in an arena where Intel in the past has struggled to gain a foothold.

A centerpiece of that strategy is an expensive campaign to grow Intel’s manufacturing footprint, with help from governments around the world that increasingly see chip-making as a national-security priority. Intel plans to open huge new chip-making plants in Arizona, Ohio and Germany, among other expansion projects.

In the U.S., the company is banking on government incentives to lighten the financial load of that expansion, including money from a $52 billion industry investment bill that passed in the Senate on Wednesday. Intel has said the pace and scale of its Ohio project is contingent on federal incentives, and it delayed a groundbreaking ceremony set for this month as the funding legislation remained in limbo.

Write to Asa Fitch at [email protected]

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