Intel's first-quarter outlook disappoints investors and analysts
Intel Corporation (INTC) reported its fourth-quarter earnings on Thursday, January 25, 2024, beating analysts' expectations on both revenue and earnings per share. However, the company's guidance for the first quarter of 2024 was below the consensus estimates, sending the stock down more than 10% in after-hours trading.
The chipmaker reported revenue of $20.9 billion, up 8% year-over-year, and adjusted earnings per share of $1.52, up 19% year-over-year. Analysts were expecting revenue of $20.8 billion and earnings per share of $1.41, according to Refinitiv.
However, Intel's outlook for the first quarter of 2024 was disappointing. The company expects revenue of $18.6 billion and adjusted earnings per share of $1.10, while analysts were looking for revenue of $19.1 billion and earnings per share of $1.23.
Intel's CEO Pat Gelsinger attributed the weak guidance to the ongoing supply chain challenges and the competitive pressures from rivals such as AMD (AMD) and Nvidia (NVDA).
"We are making progress on addressing the industry-wide component shortages, but we expect them to persist through the first half of 2024," Gelsinger said on the earnings call. "We also face a very competitive environment as we ramp our new products and work to regain our leadership position in the market."
Intel's data center group, which sells chips for servers and cloud computing, saw its revenue decline 15% year-over-year to $6.1 billion, missing analysts' expectations of $6.4 billion. The company said that the demand from cloud customers was lower than expected, while the demand from enterprise and government customers was higher.
Intel's PC-centric business, which sells chips for laptops and desktops, grew 11% year-over-year to $10.9 billion, beating analysts' expectations of $10.5 billion. The company said that the demand for PCs remained strong amid the pandemic-driven shift to remote work and learning.
Intel also announced a new capital allocation plan, which includes increasing its dividend by 5% and authorizing an additional $20 billion for share buybacks. The company said that it plans to spend $19-$20 billion on capital expenditures in 2024, up from $14.3 billion in 2023.
Intel's stock closed at $54.02 on Thursday, up 6.5% year-to-date. The stock has underperformed the broader market and its peers, as investors have been concerned about Intel's ability to compete with its rivals and regain its technological edge.
What does Intel's outlook mean for investors?
Intel's disappointing guidance for the first quarter of 2024 reflects the challenges that the company faces in a rapidly changing and competitive semiconductor industry. Intel has been losing market share to its rivals, especially in the high-end segments such as data center and gaming, where AMD and Nvidia have been offering more advanced and efficient chips.
Intel has also been struggling with its own manufacturing issues, as it has been delayed in transitioning to the next-generation 7-nanometer process technology, while its competitors have already moved to 5-nanometer or even 3-nanometer processes. Intel has recently announced that it will outsource some of its chip production to external foundries such as TSMC (TSM) and Samsung (SSNLF), but it will take time for this strategy to bear fruit.
Intel is not giving up on its innovation efforts, however. The company has recently launched its 11th-generation Core processors for PCs, codenamed Alder Lake, which use a hybrid architecture that combines high-performance and high-efficiency cores on a single chip. Intel claims that these chips offer up to 40% more performance than its previous generation.
Intel is also working on its next-generation chips for data centers, codenamed Sapphire Rapids, which are expected to launch in the second half of 2024. These chips will feature a new architecture that supports DDR5 memory, PCIe 5.0 interface, and Intel's Optane persistent memory technology.
Intel is also investing in new areas such as artificial intelligence, autonomous driving, and edge computing, where it hopes to leverage its expertise in software and hardware integration. Intel has acquired several companies in these fields, such as Mobileye, Habana Labs, and Moovit.
Intel's outlook for the first quarter of 2024 may be disappointing, but it does not mean that the company is doomed. Intel still has a strong position in the PC market, where it benefits from its brand recognition and customer loyalty. Intel also has a loyal customer base in the enterprise and government segments, where it offers reliable and secure solutions.
Intel is also taking steps to address its manufacturing challenges and regain its competitive edge in the market. Intel is investing heavily in research and development and capital expenditures, which should pay off in the long run. Intel is also returning cash to shareholders through dividends and buybacks, which should support its stock price.
Intel is facing a tough and uncertain environment, but it is not giving up on its vision of creating world-changing technology that enriches the lives of every person on earth. Intel is still a leader in the semiconductor industry, and it has the potential to overcome its challenges and deliver value to its customers and shareholders.