Due to performance guidance falling far below expectations, the pre market stock price of chip giant Intel fell by over 12%.
On January 25th local time, Intel (Nasdaq: INTC) announced its financial results for the fourth quarter and full year of 2023, with a revenue of $15.4 billion in the fourth quarter, a year-on-year increase of 10%; Net profit of 2.7 billion US dollars, with a net loss of 700 million US dollars for the same period in fiscal year 2022; The diluted net income per share (EPS) under non GAAP is $0.54. In the fiscal year 2023, Intel's annual revenue was $54.2 billion, a year-on-year decrease of 14%; Net profit of 1.7 billion US dollars, a year-on-year decrease of 79%; The gross profit margin is 40%, a year-on-year decrease of 2.6 percentage points.
Meanwhile, Intel has provided performance guidance for the first quarter of 2024. The company expects its revenue to reach $12.2 billion to $13.2 billion in the first quarter of 2024, far below market expectations of $14.25 billion; It is expected that the adjusted earnings per share under Non GAAP in the first quarter will be $0.13, lower than the market expectation of $0.34.
Intel's Q4 2023 performance. Source: Intel Financial Report
Intel CEO Pat Gelsinger said, "We achieved strong performance in the fourth quarter, exceeding expectations for four consecutive quarters, putting revenue at a high level within our guidance range. In 2024, we will continue to do our best, pursue leadership in processes and products, continue to develop our external wafer fab business and global scale manufacturing, and actively promote the popularization of artificial intelligence to create long-term value for stakeholders."
Intel's stock price closed at $49.55 per share on the 25th, with a total market value of $208.903 billion. However, due to the pessimistic performance guidance, Intel's stock price fell 10.9% after the US stock market and more than 12% before the 26th.
The CEO stated that the weak outlook is only "temporary"
According to the financial report, Intel's fourth quarter sales reached $15.406 billion, a 10% increase from $14.04 billion a year ago, finally ending the company's seven quarter decline in revenue.
For the first quarter of the 2024 fiscal year, Kissinger admitted in a post earnings conference call that the performance of personal computers and server chips, which are the company's core businesses, was relatively flat. However, due to the weak performance of its subsidiaries, including its autonomous driving company Mobileye and programmable chip division, as well as the decline in revenue from other businesses that were spun off or sold, overall revenue will be affected: "We believe that the core business is still in good condition. We have not seen any areas where market share has been lost, and products are becoming increasingly strong."
Kissinger also emphasized that the weak outlook for the first quarter of 2024 is only "temporary" because "the momentum and excitement of new products and businesses remain strong", and it is expected that "revenue and earnings per share for each quarter of the 2024 fiscal year will achieve continuous and year-on-year growth".
In the past year, Intel's stock price has risen by over 74%. According to market research firm Gartner, although the company's total market value is lower than its competitors Nvidia and AMD, which have benefited greatly from the AI (Artificial Intelligence) boom, Intel remains the largest semiconductor manufacturer in terms of revenue.
Expected double-digit decline in data center business in the first quarter
Due to the AI boom of the past two years, GPUs (graphics processors) have become more sought after than CPUs (central processing units). Intel CFO David Zinner stated during a conference call that the company expects a "double-digit" decline in its data center business in the first quarter of 2024 compared to the previous quarter: "In the past few quarters, there have been some changes in the share of CPUs and accelerators in data centers."
From a departmental perspective, Intel's largest division is its client computing division, which includes products such as laptop and personal computer processor chips. The personal computer (PC) industry has experienced a two-year downturn, but has recently shown some signs of improvement. In the fourth quarter, the department's sales reached $8.844 billion, a year-on-year increase of 33%.
Gelsinger stated that the demand for personal computer chips has "normalized", and sales in the gaming and commercial sectors have shown strong performance. Intel expects the overall PC market to expand this year. The company will also continue to launch artificial intelligence computers (AI PCs) with partners, and is expected to ship approximately 40 million AI PCs in 2024.
Intel's second largest division is the data center and artificial intelligence division, with revenue of $3.985 billion in the previous quarter, a decrease of nearly 10% year-on-year. The network and edge facilities department is responsible for selling parts to operators and network facilities, with a revenue of $1.471 billion in the previous quarter, a decrease of nearly 24% year-on-year.
Compared to its already effective competitors in the field of AI chips, Intel seems to be still in the process of striving to expand its presence. Last December, Intel held a press conference called "AI Everywhere", announcing the launch of a series of new AI products, including the first next-generation Core Ultra processor based on Intel's 4 process technology for PCs, and the fifth generation Xeon processor for enterprises with AI accelerators built into each core. Intel will also launch the third-generation Intel AI accelerator Gaudi 3 for deep learning and large-scale generation of AI models in 2024.