Intel shares dropped 7% Friday after the company reported data center revenues fell by 20% in first quarter 2021.
Data center revenues declined to $5.56 billion. However, the overall company saw only a 1% decline year-over-year for the quarter, reaching $19.7 billion. That total revenue mark was better than expected amid a positive 38% push from PC chip sales, Intel reported Thursday.
News about the data center decline caused the share price to sink to $58.04 at 9:45 a.m. ET Friday, a 7% decline from Thursday’s close. Intel said data center chip sales hit bottom during the quarter as cloud providers digested earlier purchases to deal with COVID-19 and a subsequent surge in cloud and internet use. Investors and analysts are concerned that Intel’s future is threatened by data center chip sales from competitors such as ARM and Nvidia, among others.
The company recently launched Ice Lake, its 3rd Generation Xeon processor for data centers. CEO Pat Gelsinger called it a “great product and we are seeing a strong ramp for it,” in a Thursday call with analysts according to a Seeking Alpha transcript.
“We are going to be very aggressive in terms of market share in this area,” Gelsinger added. "So we feel like we are now very much on the front foot again in this business and we are starting to see the market respond that way…We are going to fight for every socket in the market. This is an area that is core to our business. We have just delivered a great new product for it.”
Gelsinger also said Intel will see a benefit from its IDM 2.0 (Integrated Device Manufacturer) strategy announced in March that includes a $20 billion investment in two Arizona fabs and creation of an Intel Foundry Services unit.
“Intel Foundry Services is powerful and [there is]response that we have seen from …customers saying, wow, now we can co-innovate without doing all the work of creating a new architectural point in the cloud environment. This is powerful and something we think is uniquely going to help us to navigate them to an answer that is much more favorable for them as well as for us. We are off to a great start.”
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Intel’s Mobileye unit saw a jump in revenue in the first quarter $377 million, up from $254 million in the first quarter of 2020. Income for Mobileye increased to $147 million, up from $88 million.
While a small portion of Intel’s overall business, the future of autonomous driving has energized Intel and other semiconductor makers such as Nvidia because of the long-term prospects for revenues.
Mobileye is developing computer vision and machine learning-based sensing, data analysis, localization, mapping and driving policy technology for autonomous driving and advanced driver assistance systems.
Gelsinger said Intel had eight new Mobileye design wins in 1Q with automakers and has programs with 13 of the 15 top auto manufacturers. In early April, Intel announced Mobileye Drive will be the autonomous driver for Udelv’s electric self-driving delivery vehicle called Transporter. Fleets will begin operations in 2023 and more than 35,000 will be produced by 2028.
Donlen, a commercial fleet management company, announced a pre-order of 1,000 Udelv Transporters.
Udelv is a venture-backed company based in Burlingame, California.
Intel is on course for attaining net revenues of about $18.9 billion in the second quarter and about $77 billion for all of 2021.