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Intel Stock Drops 7% on $2.5 Billion Cut in 2019 Revenue Guidance

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Intel’s stock drops after its first-quarter results

Intel (INTC) announced its first-quarter earnings results after the market closed on April 25, and the updates provided by the company’s new CEO, Bob Swan, failed to please investors.

Intel stock fell 7% in after-hours trading after falling 1.89% on April 25.

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2019 revenue guidance 

Intel stock fell as the company lowered its 2019 revenue guidance by $2.5 billion to $69 billion, representing a fall of 3.5% YoY (year-over-year). Intel reported 12.7% YoY growth in 2018.

On the company’s first-quarter earnings call, Swan stated that after conversations with customers and partners, he’d learned that the overall market trend was slow. He explained that data center customers were still digesting the excess inventory and capacity they built up in the first half of 2018, NAND (negative-AND) memory pricing remained challenging, and slow demand in China (FXI) had slowed IT spending. Amid these challenges, Intel’s customers have raised hopes that demand will improve in the second half.

Data center

The semiconductor demand outlook presented by Intel has affected the stocks of its peers. Intel stated that data center spending would remain weak in the first half, especially in China. This prediction sent data center rivals NVIDIA (NVDA) and Advanced Micro Devices (AMD) tumbling 2% and 1.4%, respectively, in after-hours trading on April 25. Xilinx (XLNX) stock had already fallen 17% in April 25 trading, as its fiscal 2019 fourth-quarter earnings results had missed analysts’ estimates.

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Memory

According to Intel, NAND memory pricing remains challenging. This challenge was reflected in Micron’s (MU) fiscal 2019 second-quarter earnings and Samsung’s revised first-quarter guidance. Intel’s update sent the stocks of NAND chip makers Micron and Western Digital (WDC) down 2.7% and 1.8%, respectively, in after-hours trading on April 25.

Overall demand weakness

Intel’s outlook showed overall demand weakness in the semiconductor industry, sending Texas Instruments (TXN) and the VanEck Vectors Semiconductor ETF (SMH) down 1.4% and 2.3%, respectively, in after-hours trading on April 25.

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