Pat Gelsinger, CEO Intel, speaking on CNBC’s Squawk Box on the WEF Annual Meeting in Davos, Switzerland on Jan. sixteenth, 2024.
Adam Galici | CNBC
Intel shares dropped in prolonged trading on Thursday after the chipmaker issued an outlook for the primary quarter of 2024 that lagged analyst forecasts at the same time as results for the most recent quarter beat Wall Street estimates.
Here’s how Intel did versus LSEG (formerly Refinitiv) consensus expectations for the quarter led to December:
- Earnings per share: 54 cents adjusted, vs. 45 cents expected
- Revenue: $15.4 billion vs. $15.15 billion expected
For the primary quarter of fiscal 2024, Intel expects earnings per share of 13 cents on between $12.2 billion and $13.2 billion in sales, versus LSEG expectations of 33 cents per share on $14.15 billion of revenue.
Intel CEO Pat Gelsinger said on a call with analysts that the core businesses — PC and server chips — can be on the low end of the the corporate’s seasonal range in the present quarter, but that overall sales would take a success due to weakness in subsidiaries including Mobileye and its programmable chip unit, in addition to revenue decreases from other businesses the corporate has spun off or sold.
“The core business we see as healthy,” Gelsinger said. “We see no areas for market share loss and the products are getting stronger.”
Intel posted net income of $2.7 billion, or 63 cents per share, in comparison with a net lack of $0.7 billion, or 16 cents per share, last 12 months.
With Intel reporting sales growth within the fourth quarter of 10% from $14.04 billion a 12 months earlier, the corporate breaks a streak of seven quarters with declining revenue. Intel’s gross margin was 40%, down 2.6 percentage points annually.
Intel shares are up over 74% over the past 12 months. The corporate is the biggest semiconductor maker by revenue, based on Gartner, a market research firm, despite the fact that its market cap puts it below Nvidia and AMD on Wall Street.
Cloud providers and enormous tech corporations, the massive spenders, have been focused on the AI boom, which explains Nvidia’s recent outperformance. Up to now, a very powerful part in a server was the central processor made by Intel. Now, AI servers can have as many as eight Nvidia or AMD graphics processing units (GPUs) attached to 1 or two Intel CPUs.
“The information center has seen some wallet share shift between CPU and accelerators over the past several quarters,” said Intel CFO David Zinsner on a call with analysts on Thursday.
Intel also continues to concentrate on a five-year plan implemented by Gelsinger, who took over the chipmaker in 2021. Intel desires to catch as much as Taiwan Semiconductor Manufacturing Company in its ability to supply manufacturing services to other corporations, while also improving its own branded chips.
“The quarter capped a 12 months of tremendous progress on Intel’s transformation,” Gelsinger said in an announcement. Intel said on Thursday that it could restate past results under a latest system where Intel has to account for costs related to internal manufacturing of its own chips.
Intel Foundry Services, its business making chips for other corporations, stays nascent, with $291 million in revenue, a 63% annual increase.
Intel has been cutting costs through workforce reductions and offloading small parts of its business. Up to now 12 months, the corporate said it could spin off its programmable chip unit, after turning self-driving automobile subsidiary Mobileye into an independent company in 2022. Zinsner said that Intel had cut $3 billion in costs last 12 months and the corporate spun off or sold five different business lines.
Intel’s largest division is its Client Computing group, which incorporates laptop and PC processor chips. The general PC industry has been in a slump for 2 years, but recently began showing signs of growth again. Intel reported $8.8 billion in fourth-quarter sales, up 33%.
Gelsinger said that demand for PC chips had “normalized,” and that sales were strong within the gaming and business sectors. He added that Intel expects the whole PC market to expand this 12 months.
Intel’s second-biggest division, Data Center and AI, saw sales decline 10% to $4 billion. That unit includes server CPUs and GPUs. Intel’s Network and Edge department, which sells parts for carriers and networking, reported $1.5 billion in sales, down 24% from last 12 months.
Zinsner said that Intel expected its Data Center business to say no “double-digit” percentages sequentially in the primary quarter versus the fourth quarter.
Intel said it paid $3.1 billion in dividends in 2023.
WATCH: Intel issues weaker-than-expected outlook