Intel, the world’s largest chipmaker, reported second quarter revenue on Thursday of $19.7 billion, up by 20% over last year’s second quarter.
The improvement in revenue was driven by COVID-19’s impact on work from home trends that require more servers and PCs and cloud-delivered services. Data-centric chips grew by 43% and made up half of Intel’s revenue while PC-centric revenue grew by 7%.
The revenue of $19.7 billion beat an earlier estimate of $18.55 billion and earnings per share were $1.23 compared to an estimate of $1.11. Even with such improvements, the stock dropped more than 8% in after hours trading to $55.40 at 4:30 p.m. ET.
One factor in the stock decline may have been Intel’s revelation that it has delayed by six months a rollout of 7 nm process chips. Previous delays on PC chips have hurt Intel’s reputation. Intel said the yield of chips from the company’s 7nm process is trending about a year behind the company’s internal target.
In a call with analysts, CEO Bob Swan said the company identified a "defect mode," leading to the 7 nm delay. But he said there are "no fundamental roadblocks" and said Intel is making improvements in design. "We have learned from challenges in the [earlier] 10 nm transition," he said.
The first 7 nm PC client CPUs will ship in late 2022 or early 2023, Swan said. The first data center 7nm CPUs will ship in the first half of 2023.
Some competitors are already preparing 3nm chips causing frustrations for investors.
When asked by an analyst if the 7nm delay has caused Intel to consider contracting out fabrication of some chips, Swan said Intel is prepared to do so if the company finds the chips can be made at an attractive average sales price, among other factors.
Swan said that Intel has talked to partners in the chip industry about the prospect of using an outside fab, something that Intel has resisted in the past. He said Intel plans to continue to make its own ships through 2022 but is evaluating what will happen in 2023 and beyond. “We will be pretty pragmatic if we make stuff inside or outside. It could be building internally, mix and match or go outside if we need to,” Swan added.
Intel also issued a full-year revenue projection of $75 billion above a 2019 finish of $71 billion.
Overall, Swan called it an “excellent quarter, well above our expectations,” in a statement prior to a call with analysts. In addition to work from home influences, he said the build-out of 5G networks benefited Intel.
The data center and PC growth were driven by sales of cloud, notebook, memory and 5G products.
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