June 19, 2024

Intel sinks after first quarter outlook disappoints

Intel (INTC) stock fell more than 10% in premarket trade on Friday after the chipmaker reported fourth quarter results that topped estimates but offered an outlook for the current quarter that came in below expectations.

For the first quarter, Intel said Thursday it expects adjusted earnings per share to total $0.13, well below the $0.34 analysts were expecting, according to data from Bloomberg. Revenue in the current quarter is expected to come in between $12.2 billion-$13.2 billion; analysts had expected first quarter revenue to come in closer to $14.2 billion.

In the fourth quarter, Intel reported adjusted earnings per share of $0.54, better than the $0.44 expected by analysts, while revenue came in at $15.4 billion, better than the $15.2 billion expected.

CFO David Zinsner said the company “comfortably achieved” its goal of delivering cost savings north of $3 billion in 2023.

Looking at the company’s business units, Intel also saw results in its Data Center and AI unit fall short of expectations, with revenues tallying $4 billion in the fourth quarter, below Street estimates for $4.1 billion. This marked a 10% decline from the same quarter last year.

The data center and AI business is Intel’s opportunity to take on rivals including Nvidia (NVDA) and AMD (AMD). In December, CEO Pat Gelsinger showed off the company’s upcoming Gaudi3 accelerator designed to power generative AI software and services.

The chipmaker’s Client Computing Group posted fourth quarter sales of $8.8 billion, better than the $8.4 billion forecast by analysts and up 33% from a year ago.

The company is also in the middle of its plan to become a foundry for other chip companies. Its Intel foundry services division is expected to have generated $291 million in revenue during the quarter, less than the $343 million expected by analysts.

On Wednesday, Intel announced the opening of its latest chip manufacturing facility in New Mexico. Intel is in the midst of a yearslong turnaround effort seeking to put the semiconductor maker back on top of the chip world after losing manufacturing leadership and market share to rivals like TSMC and AMD.

Intel’s results come as the company is seeking to push its own AI bona fides and follows the debut of its Core Ultra line of PC chips in December, which Intel says will let consumers run AI apps directly on their laptops and desktops.

Gelsinger said in a press release the company this year remains “relentlessly focused on achieving process and product leadership, continuing to build our external foundry business and at-scale global manufacturing, and executing our mission to bring AI everywhere as we drive long-term value for stakeholders.”

Over the last six months, Intel stock had gained 45% before Friday’s premarket decline.

Intel CEO Pat Gelsinger speaks during an event called AI Everywhere in New York, Thursday, Dec. 14, 2023. Intel is introducing new products that are designed to be used with AI powered computers and applications. (AP Photo/Seth Wenig)

Intel CEO Pat Gelsinger speaks during an event called AI Everywhere in New York, Thursday, Dec. 14, 2023. (Seth Wenig/AP Photo) (ASSOCIATED PRESS)

Intel is hoping its Core Ultra line of chips will further goose PC sales in the year ahead as consumers and enterprise customers who purchased new laptops and desktops at the onset of the pandemic in 2020 begin to look for replacement devices.

The Core Ultra includes a neural processing unit, or NPU, which allows PCs to run certain AI applications locally rather than requiring users to rely on cloud-based applications. The idea is that NPUs will let users access AI apps without having to be online. That would ensure users’ data stays on their devices rather than requiring them to send it to an AI firm’s servers.

But it’s still unclear exactly how useful onboard AI will actually be for consumers. And even Intel admits that it’s not quite sure what AI applications will look like outside of a few early examples such as local versions of ChatGPT-like apps and AI image-editing software.

Daniel Howley is the tech editor at Yahoo Finance. He’s been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.

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