Intel reports drop in data centre revenue amid battle for market share

Chipmaker’s gross profit margin has slipped to 55.2%

Intel has historically delivered margins above 60 per cent, but its gross margin is now 55.2 per cent. Photograph: Josep Lago/ AFP

Intel has historically delivered margins above 60 per cent, but its gross margin is now 55.2 per cent. Photograph: Josep Lago/ AFP

 

Intel, the world’s biggest chipmaker, reported a drop in data centre revenue and a steep decline in gross profit margin, a sign it is losing market share to rivals and customers who are designing their own components.

The company’s shares fell about 2 per cent in extended trading after it published its quarterly earnings.

The company’s Data Center Group generated first-quarter sales of $5.6 billion, down 20 per cent from a year earlier and below Wall Street estimates. This is one of Intel’s most profitable businesses, so the lower revenue dented overall margins.

Intel said its gross margin, the percentage of revenue remaining after deducting the cost of production, was 55.2 per cent, down more than five percentage points from the same period in 2020. This is a key indicator of the strength of its manufacturing and product pricing. Intel has historically delivered margins above 60 per cent.

Earlier on Thursday, Intel said 70 people working for a construction contractor as it expands its manufacturing plant in Leixlip, Co Kildare, had contracted Covid-19. The company said the contractor was working with health authorities to identify any additional cases and that all workers at the site had been informed of the situation.

Intel employs about 5,000 people at the site.

Under new chief executive Pat Gelsinger, Intel has committed to increasing spending on new plants and equipment to try to win back leadership in chip manufacturing technology and to increase capacity to make semiconductors for other companies amid shortages.

– Bloomberg