4 Key Takeaways From Intel’s Earnings Call

After Intel’s (INTC) first quarter of 2024 outlook drew investors’ attention away from its fourth-quarter earnings beat, sending the company’s stock down more than 10% in after-hours trading, corporate leaders discussed the subpar guidance, Intel’s growing foundry business, remaining competitive in the artificial intelligence (AI) era, and AI personal computer (PC) potential.

Weak 2024 Guidance Is ‘Temporary’

Intel sees its weak first quarter of 2024 outlook as “temporary,” expecting “sequential and year-on-year growth in both revenue and EPS for each quarter of fiscal year” as “momentum and excitement around new products and businesses remain strong,” Intel Chief Executive Officer (CEO) Pat Gelsinger said.

The company projected that revenue for the first quarter of 2024 will be between $12.2 billion and $13.2 billion, compared to $15.4 billion in the fourth quarter of 2023 and $11.7 billion in the first quarter of 2023.

Chief Financial Officer (CFO) David Zinsner noted that Intel expects a “slightly sub-seasonal first quarter from [its] core product businesses.” 

But, Gelsinger said, “there’s nothing surprising about the Q1 guide here, and we’re going to be very focused on beating those numbers and building on the momentum of an improving product line.”

Intel Foundry Services Is Still Growing

Intel’s “foundry strategy, which is clearly benefiting from the surge of interest in AI,” presents a “lifetime deal value for IFS (that’s) now over 10 billion,” Gelsinger said.

IFS captured investors’ attention in Intel’s third-quarter earnings as the foundry business revenue quadrupled. While IFS revenue in the fourth quarter showed 63% year-over-year growth, it declined from the previous quarter.

While the IFS segment has shown significant growth recently, it has also incurred significant costs as Intel opens new semiconductor fabrication plants (fabs).

Gelsinger said that the majority of revenue will be realized in 2025 with Zinsner reporting that the company anticipates “peak startup costs in 2024.”

Working With Rivals While Competing

Intel executives said that they are confident in the company’s competitiveness to become an industry leader, despite ongoing partnerships with competing companies.

Intel oftentimes does not name its customers or suppliers, but the company does have relationships with other chipmakers including  Nvidia (NVDA) and Advanced Micro Devices (AMD),  Taiwan Semiconductor Manufacturing Company (TSMC).

The semiconductor industry at large has been a major benefactor of the AI era, with Nvidia leading that charge, amid AI innovation, competing companies have developed partnerships that could limit competition.

Intel Is All in on AI PCs

Gelsinger said AI PCs are the “most exciting category-defining moment since your Wi-Fi was introduced two-plus decades ago.”

The company expects “to ship approximately 40 million AI PCs in 2024 alone, with more than 230 designs from ultra-thin PCs to handheld gaming devices to be delivered this year from OEM partners Acer Asus, Dell (DELL), HP (HPQ), Lenovo, LG, MSI (MSI), Samsung Electronics and others,” the CEO said.

Intel expects that AI PCs will “bring a multi-year cycle of growth” with “great new use cases and a product line that is clearly leading the industry in this category,” Gelsinger added.