Intel Corp.’s troubles are deepening, the biggest chipmaker, who has been battling to quell steady decline in its market growth, reported significant loss in three months following a drop in data center revenue and a steep decline in gross profit margin.

The latest quarter report drops signal that moves by Intel rivals are cutting its market share, compounding the woes created by its customers who have shifted to designing their own chip components.

Bloomberg reported that the PC business performed better on continued demand for laptops that run Intel processors. But the company’s Data Center Group generated first-quarter sales that fell 20% from a year earlier and missed Wall Street estimates. The unit is Intel’s most profitable businesses, so the lower revenue dented overall margins.

The shares fell as much as 7.5% to $57.90 as trading opened Friday in New York. It was the biggest drop since Jan. 22.

Investors had been optimistic about the new CEO’s recovery plan, pushing the stock up 26% this year through Thursday, after it declined 17% in 2020 and lagged far behind its rivals.

Last month, Intel’s CEO Pat Gelsinger announced plans to greatly expand its advanced chip manufacturing capacity. The new chief executive said the plans involve spending as much as $20 billion to build two factories in Arizona and to open up its factories to outside customers. The move aims to restore Intel’s reputation after manufacturing delays sent shares plunging last year. But the strategy, which was designed to directly challenge the two other companies in the world that can make the most advanced chips, Taiwan’s Semiconductor Manufacturing Co Ltd (TSMC) and Korea’s Samsung Electronics Co Ltd, it’s a longshot..

Gelsinger inherited a mammoth task of revamping Intel’s declining dominance in the semiconductor industry, and has been making bold moves to reclaim the company’s dwindling market shares.

It is taking long and many trials for Intel to figure a way out of its ordeal. Major part of the challenge is building what the market really wants, and the company is struggling to catch up on that. Delays have allowed other chip companies to catch up and pushed customers to design their own components. Intel argued the server business is going through a temporary slump caused by too much inventory. The first quarter was the bottom and growth has returned, executives said.

The question remains whether Intel is losing market share and when profitability will start to expand. Gelsinger said Intel is now in “investment mode” during a critical period for its return to leadership, and promised he’ll deliver products that are again the best in the industry.

“The days of Intel having a stranglehold on this business have gone,” said Logan Purk, an analyst at Edward D Jones & Co. “The competitive landscape has shifted and it’s shifted quickly. That is going to weigh on this business.”

Intel said its gross margin, the percentage of revenue remaining after deducting the cost of production, was 55.2%, down more than five percentage points from the same period in 2020.

“This is a key indicator of the strength of its manufacturing and product pricing. Intel has historically delivered margins above 60%,” Bloomberg said.

The Santa Clara, California-based company raised its full-year sales forecast slightly to $72.5 billion. While that’s down from last year’s record $77.87 billion, the company still gets multiple billions of dollars more in sales than faster-growing Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., Bloomberg said in the report.

But Purk of Edward D Jones said the Intel will have to fight close the growing gap that other players in the chip industry are working hard to keep.

“Those companies though, have passed Intel in manufacturing technology and are spending heavily to maintain the gap with budgets the U.S. company will struggle to match,” he said.

In April, TSMC announced plans to invest $100 billion in the next three years to expand its manufacturing capacity and support research and development.

The world’s biggest contract producer of semiconductors, said it anticipates faster growth thanks to long-term trends like the introduction of next-generation telecommunications and high-performance computing.

Intel’s major customers like Apple are building their own chips. Amazon.com Inc. and other big cloud providers are designing more chips in-house for their data centers. Intel has been the major supplier to these businesses for years, so the trend is a concern for the company and investors. Advanced Micro Devices Inc. has also rolled out more competitive data center processors recently.

Intel said sales of chips to cloud service providers fell 29% from the same period a year earlier. That huge drop, according to Intel, was caused by “digestion” — customers pausing orders while they work through unused stockpiles of chips.

“While this has happened before and rebounds have followed, investors are increasingly concerned that delays in new Intel products have led this crucial group of customers to shop elsewhere and they won’t come back,” Bloomberg said.

Gelsinger’s revival plan is getting a boost from the PC market, though. The Covid-19 pandemic forced millions of people to work and study from home, revving up demand for electronic devices as the world relies increasingly on digitalization. There has been a surge in purchases of laptops and other computer gear which is expected to drive growth in Intel if it doesn’t dip.

Gelsinger said there’s no sign of a slowdown in PC demand. The company’s 2021 forecast is constrained by supply shortages, while profitability is being squeezed as costs increase and the company competes aggressively to win market share, he added.

“We are here to win and we’re going to be very competitive in our approach to gain market share,” he said.

Intel’s PC chip division had first-quarter revenue of $10.6 billion, up 8% from a year earlier. Analysts projected $10 billion.