Intel's Data Center & AI Unit Suffers its First Quarterly Deficit

The first quarter was a disaster for Intel, which posted its largest-ever loss, including in historically profitable divisions. The Data Center & AI division of the company experienced a 38.4% decline in revenue to $3.72 billion and its first-ever loss. Last year, the division earned $1.69 billion, while this year, it cost the business $518 million. This quarter, Intel lost $2.8 billion globally. However, the company pointed to evidence that the PC market was on the mend and stated that competitive data center chips were imminent. CEO Pat Gelsinger stated on an earnings call that the server and networking industries have not yet reached their nadir due to the continued weakness of Cloud and Enterprise. According to him, the decline in revenue for the Data Center & AI division was due to a decline in demand for data centers and increased competition. Intel's market share and margins have eroded due to competition from AMD.

However, Q1 was a critical period as the first quarter of a developing Data Center position since he became CEO, asserted Gelsinger, pointing to an upcoming slate of chips, including the Sapphire Rapids ramp, the debut of Emerald Rapids in the latter part of 2023, and Granite Rapids and Sierra Forest in 2024. Meteor Lake will be ramped up in the second half of 2023, and Arrow Lake and Lunar Lake will be launched in 2024. The Network and Edge Group's revenue decreased by 30 percent to $1.5 billion. The Client Computing Group (consumer processors for PCs and similar devices) reported $5.8 billion in revenue, a 38 percent decrease year-over-year. The company is undergoing a transition to become a third-party foundry, producing semiconductors for other companies like TSMC.