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Intel shocked Wall Street as it reported a slump in revenue in its latest quarter and slashed its financial outlook for the rest of the year, sending its battered stock price down 10 per cent in after-market trading on Thursday.

The biggest US chipmaker by revenue blamed the disappointing results on weakening economic conditions, supply chain disruptions and competitive pressures. The news followed robust earnings reports from other big chip companies in recent days and suggested that Intel had been hurt by its exposure to the shrinking PC market and its loss of leadership in leading-edge chipmaking to TSMC.

In a statement, chief executive Pat Gelsinger said the results were “below the standards we have set for the company and our shareholders. We must and will do better.”

He added that a “sudden and rapid decline in economic activity was the largest driver” behind the drop in revenues, but that it also reflected “execution issues” at the company.

On a call with Wall Street analysts, the Intel chief faced questions about why the company had not issued an earnings warning and why its results in the server market had fallen even further below expectations than in PCs.

Gelsinger said Intel had been “well into the quarter” when its customers suddenly reacted to weakening end-demand by reducing their inventory levels. He called the cutbacks “once in kind of 10-year adjustments” to inventory.

Chief financial officer David Zinsner added that Intel believed the sudden inventory adjustments were a short-term factor that would mean its second and third quarters marked “a financial bottom” before conditions started to improve. Coming price increases for its PC chips and a number of new products also gave the company high confidence the decline would be shortlived, he added.

However, Gelsinger conceded that Intel had also suffered from product slip-ups in the quarter. He added that volume sales of its latest server chip, codenamed Sapphire Rapids, had been pushed back six months, further delaying its efforts to regain its competitive edge against arch-rival AMD.

Pro forma revenue for the second quarter of the year tumbled by 17 per cent from a year before to $15.3bn, while earnings per share fell 79 per cent to 29 cents. Analysts had been expecting revenue of $17.9bn and earnings per share of 69 cents.

The news came as the House of Representatives passed the long-awaited Chips Act, which will give $52bn in subsidies to chipmakers to carry out more of their manufacturing in the US.

Intel, which stands to receive up to $6bn for a new plant in Ohio, is expected to be one of the biggest beneficiaries of US taxpayer support.

For the current quarter, the chipmaker said it expected revenue of $15bn-$16bn, well below the $18.6bn analysts had pencilled in. Earnings are expected to reach 35 cents a share, compared with a Wall Street forecast of 87 cents.

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