INTEL CORP (INTC) Earnings Summary for Q3 FY2024

Key Metrics

• Total Net Revenue: $13,284 million (down 6.2% yoy, up 4% qoq)
• Intel Products Revenue: $12,190 million (down 1.6% yoy, up 3% qoq)
  • Client Computing Group (CCG) Revenue: $7,330 million (down 7% yoy, down 1% qoq)
  • Data Center & AI (DCAI) Revenue: $3,349 million (up 9% yoy, up 10% qoq)
  • Network & Edge (NEX) Revenue: $1,511 million (down yoy, up double-digit qoq)
• Intel Foundry Revenue: $4,352 million (down 8% yoy, up slightly qoq)
• All Other Revenue: $1,039 million (down 28.4% yoy)
  • Altera Revenue: $412 million (down yoy, up 14% qoq)
  • Mobileye Revenue: $485 million (down 8% yoy)
• Non-GAAP Gross Margin: 18.0% (down from guidance of 38%)

Forward guidance

1. Q4 Revenue Guidance: Expected revenue of $13.3 billion to $14.3 billion, with a midpoint of $13.8 billion.
2. Q4 Gross Margin Guidance: Anticipated gross margin of approximately 39.5%.
3. Q4 EPS Guidance: Expected EPS of $0.12 on a non-GAAP basis.
4. 2025 OpEx Target: Operating expenses projected to be approximately $17.5 billion.
5. 2025 CapEx Guidance: Gross CapEx expected to be between $20 billion to $23 billion; net CapEx between $12 billion to $14 billion.
6. 2025 Revenue Growth Target: Aiming for trend line revenue growth of 3% to 5% annually, with potential to scale up to 7% to 9% as demand dictates.
7. Adjusted Free Cash Flow: Expected to be positive in 2025, following a negative outlook for 2024 due to restructuring charges.

Key takeaways

• Positives:
  • Pat Gelsinger noted, "We delivered Q3 revenue above the midpoint of our guidance," indicating strong operational performance and effective cost reduction measures.
  • The company achieved a "greater than 15% workforce reduction" and reduced capital expenditures by over 20%, enhancing operational efficiency.
  • Gelsinger emphasized a "stepped up focus on efficiency and execution," which is expected to positively impact profitability moving forward.
  • The launch of the Intel Core Ultra 200V series processors positions Intel as a leader in the AI PC category, with Gelsinger stating, "We remain on track to ship more than 100 million AI PCs accumulative by the end of 2025."
  • The establishment of the x86 Ecosystem Advisory Group with industry leaders aims to enhance software development and interoperability, showcasing Intel's commitment to innovation.
• Negatives:
  • Gelsinger acknowledged that Q3 profitability was impacted by "significant restructuring charges," reflecting the aggressive cost-cutting measures taken.
  • David Zinsner reported a non-GAAP gross margin decline to 18%, primarily due to "approximately $3 billion of non-cash impairment and accelerated depreciation charges."
  • The Gaudi 3 AI accelerator's adoption has been slower than anticipated, with Zinsner admitting, "We will not achieve our target of $500 million in revenue for Gaudi in 2024."
  • Gelsinger mentioned the need to "fight for every inch" in a competitive landscape, indicating ongoing challenges in market positioning.
  • The transition to 18A is still in early stages, with Gelsinger stating, "We are not at that phase of the process development yet for 18A," suggesting potential delays in realizing financial benefits.

Peer Summary

• Microprocessors & Servers (AMD): AMD reported a 22% year-over-year revenue increase, driven by "record Instinct and EPYC product sales," indicating strong demand in the Data Center segment. The Client segment grew 29%, suggesting robust market performance that could challenge Intel's positioning.
• Graphics Processing Units (NVIDIA): NVIDIA's revenue surged 122% year-over-year, with strong demand for AI applications. Jensen Huang noted, "Customers continue to accelerate their Hopper architecture purchases," highlighting a shift towards accelerated computing that may impact Intel's market share.
• Memory & Storage (Micron): Micron emphasized "strongest competitive positioning in Micron's history," with record-high revenues in NAND and storage. The focus on AI-driven demand suggests a growing market that could influence Intel's memory solutions.
• Telecommunications (Qualcomm): Qualcomm's automotive revenue grew 68% year-over-year, indicating a strong market for mobile processors. The shift towards "connected computing for the age of AI" reflects a trend that may affect Intel's mobile segment.