Intels forecast for the current quarter sent the companys shares

Intel’s forecast for the current quarter sent the company’s shares down more than 10%

Fresh statistics Intel reported both a 10% decline in revenue to $15.4 billion and a 14% decline in full-year revenue to $54.2 billion in its most recent quarter. Most importantly, the revenue forecast for the current quarter was between $12.2 billion and $13.2 billion, below analyst expectations. Shares fell more than 10% in after-hours trading in the United States.

    Image source: Intel

Image source: Intel

At the same time, it is worth noting that Intel’s fourth-quarter revenue exceeded investors’ expectations, who expected $15.15 billion. Analysts’ forecast for the current quarter was that Intel would generate revenue of $14.15 billion. The company’s management’s revelations at the quarterly event came as a disappointment to them. CEO Patrick Gelsinger admitted that the company’s main sources of revenue in the form of the PC and server components segment in the current quarter will be at the lower limit of the seasonal trend, but the largest decline will be observed in the revenue of Mobileye and programmable solutions divisions . Overall, the core business is stable, explained Gelsinger, the company will not lose its market position and its products will become stronger.

Last quarter’s 10% year-over-year sales growth broke a streak of seven quarters of decline. Additionally, as Gelsinger noted, Intel exceeded its own revenue expectations for the fourth quarter in a row. The company’s non-GAAP net income increased 263% to $2.3 billion; According to the GAAP method, in the fourth quarter of the year before last, net losses were incurred in the amount of $ 700 million, and the company closed the last quarter with a net profit of $ 2.7 billion. Profit margins were increased from 39.2% to 45.7%, research and development costs were reduced by 9% to $5.6 billion, partially contributing to the company’s goal of reducing expenses by $3 billion. Dollar for the full year 2023. From the operating loss according to GAAP, an operating profit margin of 16.8% was achieved in the last quarter. Last year, the company spun off or sold five of its businesses to outside investors.

“In 2024, we will focus on achieving progress and product leadership, further expanding the chip contract manufacturing business and forming a global manufacturing network, and fulfilling our mission to implement artificial intelligence everywhere.” – said the head of Intel at the quarterly reporting conference. CFO David Zinsner added that Intel will continue to implement its “domestic contract manufacturer” business model this year, which will enable greater cost transparency and control and deliver higher financial returns to investors.

In general, at the end of 2023, Intel reduced sales by 14% to $ 54.2 billion, the profit margin according to GAAP fell from 42.6 to 40%, spending on research and development and marketing increased by 12% to 21.7 Billion dollars cut, net profit immediately fell 79% to $1.7 billion. The company ended the period with $11.5 billion in free cash and $3.1 billion allocated to paying dividends.

    Image source: Intel

Image source: Intel

Intel’s Client Solutions segment revenue grew 33% year-over-year to $8.8 billion in its most recent quarter; For the full year, this division reduced sales by 8% to $29.3 billion. In any case, Intel continues 54% dependent on the PC market, and in this sense, attempts to further diversify the business have not yet brought visible results. Operating profit in the division rose 451% to $2.9 billion last quarter as customers resumed purchasing products following the overstock crisis.

In the server business, sales fell 10% to $4.0 billion in the last quarter. Intel’s CFO attributed this to a reallocation of budgets in this segment from central processing units in favor of computing accelerators. At the end of the full year, the server division reduced the company’s revenue by 20 percent to $15.5 billion. Operating profit in the fourth quarter had to be reduced by 38 percent to 100 million US dollars. The company also suffers from competitive pressure in the server segment and the remaining surplus products in the warehouses in the programmable segment decisions.

In the network solutions and edge computing segment, revenue fell 24% to $1.5 billion in the fourth quarter and fell 31% to $5.8 billion for the full year. The Mobileye division reduced revenue by 13% to $637 million in the most recent quarter. but at the end of the full year it rose 11% to $2.1 billion, which was a new record. The contract chip manufacturing business (IFS) grew revenue 63% to $291 million last quarter and 103% for the full year to a record $952 million, but still failed to break the psychologically important mark of 1 reach billion US dollars. Additionally, the division ended the fourth quarter with an operating loss of $113 million as it needs to invest heavily in the future.

Intel reiterated that it expects to regain leadership in lithography by 2025 and is already offering advanced Intel 3 process technology to its customers. To ensure progress in lithography at the post-18A technology milestone, the company began installing the world’s first ASML high numerical aperture lithography scanner (High-NA EUV) at its research center in Oregon. According to its own information, the company was able to win four external customers for its Intel 18A process technology last year. Last year, more than 75 test chips were manufactured for customers, and more than 50 more test chips will be produced in the next two years, more than 75% of which use Intel’s 18A process technology. Last quarter, the company secured four contracts for chip packaging services using advanced spatial techniques. The total number of customers in chip packaging services has reached five. Intel says its contracts with third-party customers for the production of chips and their packaging total $10 billion when the entire product life cycle is taken into account. Gelsinger admitted that this is not enough for the harmonious development of the contract business, which is why the company is now working on winning additional orders.

According to the Intel boss, the moderate forecast for the current quarter will likely be partially offset by more successful subsequent quarters. According to him, the company is already not losing its market position in the segment of PC and server components. Intel will make up for lost time in the market for computing accelerators for artificial intelligence systems. In any case, the current rapid development will allow the company to sell its central processors more actively.

Gelsinger also reiterated his forecast for the size of the PC market this year. In his opinion, this number will increase from 270 to 300 million PCs, and the appearance on the market of processors with the function of local acceleration of artificial intelligence systems will help restore demand for new computers.

About the author

Dylan Harris

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

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