Shares of Intel (NASDAQ:) are down more than 3% in premarket trading Friday after the chipmaker reported a weaker-than-anticipated Q2 revenue outlook.

Intel posted adjusted earnings per share of 87c. This is higher than the consensus estimate of 80c/share. Just above the estimate of $18.31 trillion, adjusted revenue reached $18.35 Billion in the third quarter.

An adjusted gross margin of 53.1% was reported by the company, which beat analyst expectations of 52%. Analysts expected 21%. The adjusted operating margin was 23.1%.

Intel anticipates an adjusted EPS of 70c for Q2, well below analyst estimates of 82c. In addition to missing estimates of $18.46 trillion, adjusted revenue is projected to reach $18.4 billion. In Q2, the adjusted gross margin was 51%, while analysts expected 52%.

Intel anticipates an adjusted EPS at $3.60 for the entire year. This is up from the previous forecast of 3.50 and the consensus estimate of $3.46. The adjusted revenue will be $76 billion, which is higher than the $75.38 billion expected.

INTC expects FY adjusted gross margin to be at 52% according to analyst estimations.

After the results, Hans Mosesmann from Rosenblatt reiterated his Sell rating for Intel.

“Intel delivered a solid 1Q22 beat and beat (relative to our expectation) for 2Q22 on strong NEX (network edge), DC, and commercial PC, offset a bit by weaker low-end consumer PC. The 2Q outlook however, relative to consensus expectations, was a bit of a disappointment on the lower sales and GM decline of ~200 bps q/q, with our view being that it was actually quite a good guide given the 14-week 1Q22 dynamic,” Mosesmann said.

BMO analyst Ambrish Srivastava commented:

“Intel’s results were higher, 2Q guidance is lower, however, the company is keeping its 2022 targets largely intact, with the benefit from the EPS beat in 1Q flowing through to the year. In the guidance, there is an expectation for strong 2H in almost all segments. That includes the PC market segment as well as the segment connected to data centers. Our estimates are largely unchanged, and we continue to rate shares Market Perform.”

By Senad Karaahmetovic