Intel Stock Breakdown: How Does Intel Make Money In 2022?

Key Takeaways

  • Intel indicated that its profits would be lower than estimated for the third quarter of 2022 and the entire year. This will put further downward pressure on its stock price.
  • The company has focused on producing quality processors that drive a majority of the computers in daily use around the globe.
  • The U.S. government is investing $20 billion into constructing Intel foundries in the U.S. to secure stateside production of semiconductor chips for the military.

Intel has been a household name in the computer chip industry for decades, providing steady growth for investors. But in 2020, everything came crashing down. Global chip shortages began to surface, there was a change of the company’s leadership, and Intel announced a delay in the next version of their processing chip—the Intel 4.

All this converged while rivals were getting their new chips to market, influencing many investors to flee the stock. As a result, the king of chips was dethroned. Two years later, after the dust has settled, where is Intel, and is the stock worth buying?

Intel Stock News

Intel’s stock has lost 35% of its value since the opening of 2022. The company reported a disappointing loss in revenue at the end of the second quarter, prompting the recent loss in value.

However, CEO Pat Gelsinger purchased 14,800 shares of Intel for $33.86 in August, his third such buy in 2022. The purchase, made on August 25, 2022, came a day after he announced a $30 billion collaboration with Brookfield Asset Management to build more chip-making facilities in Arizona.

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Intel reported $156.64 billion in profits on $659.18 billion in revenue during the previous decade. Its revenue for the second quarter of 2022 was $15.3 billion, missing Wall Street’s expectation of $17.92 billion. In addition, Intel indicated that its profits would be lower than estimated for the third quarter of 2022 and the entire year. This will put further downward pressure on its stock price. A significant reason for the decrease in sales comes from a large reduction in purchasing by its major business customers.

Other issues that play into the lower earnings include supply chain disruptions, low inventories, and competitive pressures in the semiconductor industry. The biggest loser for Intel is its data center division. Revenue for this division was down 16% during the second quarter. Intel’s operating income in the data center business dropped by 90% year over year, with total income at $0.2 billion for fiscal year 2021, down from $2.1 billion during fiscal year 2020. Much of the revenue loss is attributed to Nvidia and Advanced Micro Devices picking up market share.

In contrast, Intel’s Mobileye division reported a 40% increase in revenue for 2021 and increased its margins. The division is poised for growth as it’s focused on creating autonomous driving technologies that range from software to hardware. Automated driving is in its infancy, and there’s a strong push in the automotive industry to make the technology into a commonplace reality. Intel has committed to being a leader in this area of driving technology.

Ownership of Intel shares comes with a quarterly dividend that averages around 4%. The most recent dividend paid out was $0.365 for the quarter ending July 14, 2022.

Intel Income Statement Breakdown

Intel has six different operating units under its main business structure. They include:

  • Client Computing Group (CCG)
  • Datacenter and AI Group (DCAI)
  • Network and Edge Group (NEX)
  • Accelerated Computing Systems and Graphics Group (AXG)
  • Intel Foundry Services (IFS)
  • Mobileye (MBLY)

Client Computing Group

CCG designs and creates platforms for the end user in different forms. It focuses on growth segments for higher growth, including 2-in-1 gaming, commercial, and thin-and-light computing formats. The operating unit is also focused on opportunities in internet connectivity.

Revenue came in at $7.7 billion for the second quarter of 2022, but this represented a decline of 25% year-over-year..

Datacenter and AI Group

DCAI works on developing data center products using Intel’s premier servers and field programmable gate array products. It also leads Intel’s efforts in artificial intelligence research and production.

This segment earned $4.6 billion in revenue for the second quarter of 2022, but saw a decrease of 16% year-over-year.

Network and Edge Group

NEX works to create leading-edge technology and product leadership. This helps businesses with improved network traffic management, enhanced system security, and higher processing speeds. This technology also allows for easier system expansion in the future. It brought in $2.3 billion in revenue, which was an 11% increase.

Accelerated Computing Systems and Graphics Group

AXG focuses on delivering high-performance computing and graphics to data centers, clients, and enterprises.

This segment earned $186 million in revenue for the second quarter of 2022, compared to $177 million during Q2 for 2021.

Intel Foundry Services

IFS is the heart of Intel’s operations. It’s a standalone business that manufactures computer chips that meet customer specifications and delivers products to consumers. It also features industry-leading sort and test capabilities. IFS is also leading a major Department of Defense initiative to create a U.S.-based commercial semiconductor foundry manufacturing base to make vital products for the U.S. military and Department of Defense.

Revenue came in at $122 million for last quarter, which represented a decrease of 54%.

Mobileye

Mobileye is researching and developing driving assistance and self-driving applications for the automotive industry. The division’s operations cover the entire stack of software and hardware needed for assisted and autonomous driving.

Revenue for this segment came in at $460 million (versus $327million a year ago), which is an increase of 41%.

Investors interested in Intel’s Mobileye division should know that the company has filed an S-1 to formally spin-off this unit into its own company.

Intel Balance Sheet Review

For the year 2021, Intel’s sales and revenue totaled $79.02 billion. This represented 1.49% sales growth—a drop from 8.2% in 2020. The cost of goods sold for 2021 was $35.42 billion, a slight increase over $34.46 billion in 2021.

Intel’s gross income for 2021 was $43.81 billion, representing a 0.47% increase from 2020. Intel’s net income for 2021 was $19.87 billion, representing a 4.93% decrease from 2020’s net income of $20.98 billion.

For the second quarter of 2022, Intel reported earnings of $0.29 per share (versus estimates of $0.70 per share). Compared to the second quarter of 2021, revenue for the current quarter was down 22%. Gross margins declined from 50.4% the first quarter of 2022 to 36.5% this quarter.

Is Intel Stock a Good Investment?

Intel is a company with a solid operational foundation and good governance by its CEO and board. It’s one of the world’s first semiconductor manufacturers, and it has over 50 years of continual operations. The company has focused on producing quality processors that drive a majority of the computers in daily use around the globe.

Only you as an investor can pass judgment on whether or not Intel is a good investment, but the company has been a consistent performer throughout its existence. It’s worth considering putting it into your portfolio for a long-term hold due to the company’s efforts to re-establish manufacturing in the U.S. and continually improve its products. Add in a decrease in stock price by over 40% and some investors are taking a position in the stock.

Intel is investing heavily in its future with the construction of new semiconductor foundries around the world. Its reconfiguration and diversification of manufacturing facilities are positioning Intel to cut heavily into Taiwan Semiconductor Manufacturing’s market share.

The U.S. government is investing about $20 billion into constructing Intel foundries in the U.S. to secure stateside production of semiconductor chips for the military. This is a long-term project that just about ensures Intel’s existence for both the short- and long-term.

Major institutional investors own substantial shares of Intel stock, indicating that there is trust and faith in the ability of Intel to perform and grow. Some of these institutional investors include Vanguard, BlackRock, and State Street.

Conclusion

The near-term outlook for Intel is still very cloudy. They are having trouble hitting analyst estimates and continue to revise guidance down. The long term, however, looks rosy. With solid long-term contracts with the U.S. government and the release of newer chips, the company should be back to leading the industry in a few years.

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