Credits: Thomas Hawk // CC2.0 License

Intel Corporation just took a massive hit at the stock market after its shares fell by 10% on Thursday because of unsatisfactory Q3 results. According to Intel’s Q3 report, the company has lost huge numbers in its data center sales and has just managed to barely cross the already dismal revenue expectations.

The American chipmaker reported revenues of $18.3 billion in Q3 against the expectations of $18.26 billion by analysts. It also beat the earnings per share estimates by a small margin, recording $1.11 against the $1.10 prediction by the analysts.

q3 2020 earnings infographic

It might sound like Intel had a great quarter since it was able to cross the expectations in Q3 2020, but,  that the estimates for the company were much lower compared to where it stood during this time around last year. The earnings per share numbers were down by 22% from 2019, whereas, revenues are down by around 4%.

The major cause of this downfall is the drop in Intel’s data center sales. The COVID-19 pandemic has strangled a lot of companies and their sales, including Intel. The company reported a 10% fall in revenues from its data center business compared to last year. Intel says it will continue to see the decrease in sales of cloud computing in the coming days as well.

It was a mixed result for Intel’s data center business, where on one hand the Data Center Group’s (DCG) “Enterprise & Government” business dropped massively, and on the other hand, the revenue from the cloud business grew by 15%. But the impact of the losses was higher as the overall DCG business reported revenues of only $5.9 billion as against the expected $6.22 billion.

“We saw a big change in our data center demand profile with enterprise and government dropping 47% year over year after being up 30% for two consecutive quarters,” said George Davis, Intel CFO.

Intel’s chip business also seems to be in jeopardy. After almost 30 years of domination in the chipmaking market, Intel finally looks to be on the back foot with heavy competition from AMD. Advanced Micro Devices’ cheap and powerful chips have forced Intel to bring down the prices of its semiconductor chips as well, which has resulted in lower profit margins for the Santa Clara-based company. Moreover, the situation is expected to only become worse, since AMD managed to one-up Intel during the launch of its Zen 3 based Ryzen CPUs earlier this month.

The company cites the pandemic as a reason for its recent decline, where the demand for the cheaper semiconductors has increased. However, analysts are criticizing Intel for using the pandemic as an excuse, saying that the pandemic witnessed the highest demand for PCs in a long time, and as a matter of fact, it should have benefited the company.

Going forward, Intel has predicted an even worse slump for Q4 2020. The company forecasts revenues of $17.4 billion and adjusted earnings per share of $1.10, which slightly beats the expectations of the analysts. The Wall Street analysts predict $17.34 billion in revenues and adjusted earnings per share of $1.06.

Looking at the current numbers and the investors’ confidence in the company after poor results, it might be difficult for Intel to achieve what it is forecasting. The drop in share value might have also forced some to sell their equity in the company, further damaging the American chipmaker and their ambitions.