Intel expects to accelerate revenue growth after 2025 but urges
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Intel expects to accelerate revenue growth after 2025 but urges investors to be patient for now

This week’s Investor Meeting Day was designed by Intel to share its mid-term strategy, and CEO Patrick Gelsinger and new CFO David Zinsner have taken on that mission. As expected, Intel will actively invest in returning its technology leadership over the next few years, so the financial return on the implemented changes won’t be felt until mid-decade.

Image source: Intel

Image source: Intel

Let’s capture that right now statement Intel management slightly disappointed investors as the company’s share price continued to fall by more than a percentage point after the event ended and by a comparable amount after the close. In their report, Intel representatives divided the coming periods of business development into two phases: the “investment phase”, which is to be implemented in 2023 and 2024, and the “long-term model”, which is to be implemented starting in 2025 or 2026. First of all, Intel wants to increase capital expenditures to 27 billion US dollars this year and is already moving closer to the market leader TSMC in this key figure.

At the end of the current year, the company expects revenue to grow 1.7% to $76 billion and keep profit margin at 52%. Over the next two years, the yield will be in the 51% to 53% range, which is below historical levels inherent in the company. Operating expenses can reach 28-30% of total revenue and revenue growth rates will not exceed 5-9%.

Only in 2025, if Intel manages to master five new technical processes by then and develop its manufacturing base to the desired level, will the return return to the 54-58% range again and sales will start to grow by 10-12% yearly. The share of operating costs in sales is reduced to 25-27%. This is achieved not only through cost optimization and regaining lost market positions, but also through advances in new market segments for the company – discrete graphics, computational accelerators, automotive and contract manufacturing.

Incidentally, third-party analysts question Intel’s ability to achieve stated revenue growth rates in the first phase of investment. If Intel’s revenue grows by 1 percent this year, they believe this figure will not exceed 3 percent next year, and only in 2024 is there some chance of reaching 8 percent. As already mentioned, this skepticism is reflected in the price development of Intel shares.

The company will combine different sources of financing when building new companies. These are both advance payments from customers in the case of a contract deal and government subsidies that the company expects when implementing its projects in the USA and Europe. Finally, investment funds will also be involved in the implementation of infrastructure projects, such as the construction of new types of power plants using renewable energy sources. As previously mentioned, as Intel builds new facilities, it will construct buildings just ahead of actual demand to expedite the deployment of additional manufacturing capacity when needed.

Patrick Gelsinger also noted that Intel’s decision to buy Tower Semiconductor’s assets for $5.4 billion will not affect the company’s willingness to invest in building European businesses. Information on the respective plans will be published shortly.

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Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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