Intel reported fourth quarter 2023 earnings after the market close on January 25th, posting mixed results compared to analyst expectations. While Q4 revenue and earnings per share beat estimates, Intel provided weaker-than-expected guidance for 2024, sending the stock lower in after hours trading.
Q4 Financial Results Top Expectations
For the fourth quarter, Intel generated revenue of $14.04 billion, which was above analysts’ consensus estimate of $13.93 billion. This represented a 7% decline compared to the $15.3 billion in revenue Intel produced in the year-ago quarter.
However, on the bottom line, Intel delivered earnings per share of $0.69, surpassing the $0.62 EPS that Wall Street anticipated. The company’s EPS declined 35% year-over-year from $1.06 per share in Q4 2022.
|Q4 2023 Actual
|Q4 2023 Estimate
Intel CEO Pat Gelsinger commented on the results: “Q4 marked Intel’s best quarter ever for shipments of client and data center processors. Our focus on operational execution enabled us to exceed our Q4 guidance across the board…There is more work ahead as we drive to recapture process performance leadership and deliver on our ambitious transformation, but we are on the right path.”
Weaker-Than-Expected 2024 Guidance Disappoints Investors
While Q4 results topped expectations, Intel’s weak guidance for 2024 is what seemed to concern investors. The company said it expects 2024 revenue of around $60 billion versus the Wall Street consensus forecast of $65 billion.
Intel is also guiding for an EPS loss between $0.15 and $0.05 per share in 2024. This gloomy profit outlook comes as the company ramps up investments in new manufacturing capacity over the next several years.
As a result of the disappointing guidance, Intel stock declined over 7% in after hours trading following the earnings release. The stock fell to around $27 per share after closing the regular session at $29.13.
Transformation Plan Progressing But Economic Uncertainty Remains
On the company’s quarterly conference call, Intel executives talked more about the progress being made on the company’s turnaround plan. Called “Intel Accelerated,” the strategy aims get Intel’s operations back on track after losing its leadership position in chip manufacturing technology.
Intel has begun early production of processors on its next-gen “Intel 18A” and “Intel 20A” process nodes. These more advanced manufacturing technologies should help Intel better compete with rivals like TSMC and Samsung.
However, Intel is also facing economic uncertainty and the possibility of a recession in 2024. This challenging demand environment likely factored into management’s conservative full-year guidance.
Nonetheless, Intel still expects to generate over $3 billion in incremental revenue in 2024 from its foundry business as it onboards new customers. Gelsinger also reaffirmed plans to aggressively expand capacity, including building new mega chip fabs in the U.S. and Europe over the next 10 years.
What Analysts Are Saying Post-Earnings
According to TipRanks, Wall Street analysts had mixed reactions to Intel’s quarterly results and guidance:
Morgan Stanley analyst Joseph Moore reiterated an Underweight rating and $24 price target on Intel after earnings. Moore believes Intel’s 2024 guidance implies “no real progress on margins or cash flows,” warranting a discount valuation.
On the other hand, Citi analyst Christopher Danely maintained a Buy rating and $30 price target. Danely still sees Intel as one of the “most compelling turnaround stories” in the semiconductor sector this year.
Meanwhile, Rosenblatt Securities analyst Hans Mosesmann kept his Sell rating and $20 price target. Mosesmann thinks Intel is facing years of lost market share and calls its 2024 guidance “disastrous” compared to its computing peers.
Overall, Wall Street analysts seem cautious on Intel headed into 2024, even as the company makes strides on its multi-year turnaround strategy. Investors may need more evidence of improving profitability before regaining confidence in Intel’s comeback story.
What’s Next for Intel?
In the year ahead, Intel will remain laser-focused on advancing its IDM 2.0 strategy to rebuild manufacturing leadership. This includes ramping production of next-gen process tech while also expanding foundry capacity to support new customer engagements.
However, the weak macro backdrop creates uncertainty and could significantly impact end-market demand across PCs, servers, and other segments Intel operates in.
If challenging market conditions persist, it may delay Intel’s timeline for reaccelerating top and bottom line growth. This likely explains why management set the bar low with its 2024 financial guidance.
Nonetheless, Intel believes it is laying the groundwork this year through heavy investments to drive sustainable growth for years to come. Investors now must decide if Intel’s strategic actions and investments make the stock compelling at current levels heading into the new year.
So in summary, while Intel’s Q4 results gave some encouraging signs, the company’s weak 2024 outlook shows it still faces a steep climb to get back on a path toward reclaiming sector leadership.
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