Coronavirus clouds Intel outlook

Intel Corp on Thursday forecast second-quarter earnings below Wall Street views as it cited the cost of readying a new PC chip and said it could not make a forecast for the full year because of economic uncertainty caused by the coronavirus pandemic.

"It's really hard to think about the second half in terms of how demand is going to look compared to what we ultimately thought when we first gave guidance," Chief Financial Officer George Davis told investors on a conference call.

The COVID-19 pandemic has ripped through the semiconductor industry, disrupting operations as lockdown orders hit countries in the chip supply chain such as Malaysia, where chip operations were eventually allowed to resume but suffered disruptions.

Intel Chief Executive Bob Swan said the company had to "temporarily pause" some projects due to local government restrictions at some sites, but said Intel's factories largely have been able to meet demand.

In an interview with Reuters, Davis said stay-at-home orders around the world drove higher demand for Intel's chips during the first quarter. Demand for PCs also rose, Davis said.

There was increased demand for data center chips "as people tried to make sure their infrastructure could match the requirements of having so many of their employees working remotely. And obviously with the cloud, there's much more activity on the cloud."

But Davis said Intel expects lower gross margins in the second quarter because of the costs of readying its "Tiger Lake" 10-nanonmeter processors for the PC market. Intel plans to sell those chips starting in the third quarter. The costs drove Intel's profit forecast for the quarter below Wall Street expectations, he said.

Intel's tepid forecast also weighed on shares of other chipmakers. Nvidia Corp, Micron Technology, Applied Materials, and Advanced Micro Devices fell between 1% and 2% after the bell.

Intel expects second-quarter adjusted profit of $1.10 per share, compared to analysts' average estimate of $1.19 per share, according to IBES data from Refinitiv.

Revenue in Intel's client computing business, which caters to PC makers and is the biggest contributor to sales, rose 14% to $9.8 billion during the first quarter, beating FactSet estimates of $9.34 billion.

Intel's higher-margin data center business reported revenue that surged 43% to $7 billion, while analysts on average had expected revenue of $6.32 billion, according to FactSet.