Intel’s stock price dropped nearly 11% following its latest earnings call on Thursday that included a disappointing first quarter forecast.
The company said first quarter revenues should be $12.2 to $13.2 billion with a gross margin of nearly 44.5%, but such revenues for Intel’s core businesses are considered at the slightly lower end of a normal seasonal pattern. Chief Financial Officer David Zinsner also said there will be material inventory corrections in the Mobileye unit and the Programmable Solutions Group.
CEO Patrick Gelsinger said Intel sees no areas for market share loss in the first quarter, with its products getting stronger. The forecast, he added in response to a question from analyst, reflects how Intel sees the market. “We’ve also said, hey, we’re improving every quarter as we go through the year, right?” he added. “Improving our revenue, top line, improving on profitability as we go through the year…
“As the year improves, new product lines [are] emerging with tailwinds in areas like AIPC, and Gaudi ramping for accelerators. Overall, a lot of things just keep improving as we go through the year, combined with good cost discipline. We feel quite comfortable that we’re starting strong.”
The stock drop on Friday and less than inspiring forecast came on a strong fourth quarter where fourth-quarter revenue was $15.4 billion, up 10% year-over-year, even as the full year 2023 revenue was down 14% to $54.2 billion.
Intel also delivered $3 billion in cost savings in 2023 and exited five businesses—10 since the company entered a transitional period under Gelsinger. Against this backdrop, Intel still declares it can produce five new silicon nodes in four years, a goal he set when he first took over as CEO nearly three years ago. The ambitious goal on nodes has impinged on Intel’s profitability, the company said.
Patrick Moorhead, technology analyst at Moor Insights & Strategy, said he agreed the first quarter forecast is “disappointing” but described the big-picture at Intel as positive. The company still controls about 80% of the PC and roughly 80% of the server market and has had strong gross margins, improving its gross margin 6.5 percentage points year-over-year in the fourth quarter, he noted.
A recent set of positive foundry announcements, like a partnership with United Microelectronics, show that Gelsinger has made solid choices. “Foundry is the long game for Intel,” added Daniel Newman, CEO and chief analyst at Futurum Research. Both Newman and Moorhead commented on a joint Six Five podcast.
Fourth quarter revenues by business unit showed strength in PCs and other clients and Intel Foundry Services with weakness in data center and AI. The year-over year comparison of revenues broke down as follows: Client Computing, $8.8 billion (up 33%); Data Center and AI, $4 billion (down 10%); Network and Edge, $1.5 billion (down 24%); Mobileye, $637 million (up 13%) and Intel Foundry Services, $291 million (up 63%).
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