Chipmaker Intel last night forecast second-quarter revenue and profit below Wall Street expectations on worries of weak demand in its largest market, PCs and increased supply-chain uncertainty due to Covid-19 lockdowns in China.
Shares of the company fell 5% in after-market trading on Wall Street.
Rising inflation, resurgence of Covid-19 in China and uncertainties around the war in Ukraine have shifted consumer spending away from gadgets, hurting Intel. More than half of its revenue last year came from the segment selling processors for PCs.
"We are expecting that Shanghai does open up fairly soon, but that does moderate our outlook a little bit on Q2," Intel chief executive Pat Gelsinger told Reuters.
"It doesn't change any perspective on the year, which we think as we go into the second half, you have more PC demand," he added,
The first quarter beats help Intel meet its full-year revenue outlook, he added.
As lockdowns in China continue, supply-chain bottlenecks are likely to hurt Intel's customers, in turn affecting the chipmaker's business.
"We think Intel still has to prove they can meet guidance targets before the stock receives full credit for a strong guide," said Logan Purk, analyst at Edward Jones.
Analysts say the PC market is coming off of searing rates of growth over the last two years as remote working and learning triggered high demand during the pandemic.
Revenue at Intel's Client Computing Group, which supplies PC makers and is the largest contributor to the company's revenue, fell 13% to $9.3 billion in the first quarter.
The company expects current-quarter adjusted profit of 70 cents per share on revenue of about $18 billion, below analysts' average estimate of 83 cents per share on $18.38 billion, according to IBES data from Refinitiv.
Intel is also facing increasing competition in the data centre space, as peers Nvidia and Advanced Micro Devices are ramping up their chip production to cater to the booming market amid growth in the metaverse, AI applications and cloud computing.
Revenue from Intel's higher-margin data centre and AI business rose 22% to $6 billion in the reported quarter.
However, adjusted revenue for the first quarter was $18.4 billion, compared with analysts' average estimate of $18.31 billion.
On an adjusted basis, Intel earned 87 cents per share, above expectations of 81 cents.