Shares of Intel (NASDAQ: INTC) plummeted on Friday, following the release of its second-quarter earnings report and conference call. As of 3:20 p.m. EDT, Intel's stock was down more than 16%.
Intel's Q2 revenue climbed 20% year over year to $19.7 billion, driven by strong growth in its data-focused businesses. Its adjusted earnings per share, meanwhile, increased by 16% to $1.23. Both figures were above Wall Street's estimates. Analysts expected revenue and adjusted EPS of $18.5 billion and $1.11, respectively.
However, Intel gave investors multiple causes for concern. At 53.3%, Intel's gross margin was down sharply from the 59.8% it reached in the prior-year period and the lowest it's been in more than a decade. Falling gross margins typically reflect higher costs and an inability to pass those costs on to customers.
Worse still, Intel said the launch of its new 7-nanometer chips would be delayed by roughly six months. Analysts say the delay will give rival Advanced Micro Devices (NASDAQ: AMD), which has already begun selling its 7-nanometer chips, a significant advantage. AMD's stock, in turn, rose sharply on the news.
There were already concerns that AMD's new chips -- due to their significantly improved performance and advanced graphics capabilities -- would begin to take share from Intel. A 6-month delay will only add to Intel's troubles and likely accelerate AMD's market share gains. Should this scenario play out, more pain could lie ahead for Intel's shareholders.
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