Intel (NASDAQ:INTC) Q4: Beats On Revenue But Quarterly Revenue Guidance Significantly Misses Expectations
Computer processor maker Intel (NASDAQ:INTC) reported Q4 CY2024 results beating Wall Street’s revenue expectations , but sales fell by 7.4% year on year to $14.26 billion. On the other hand, next quarter’s revenue guidance of $12.2 billion was less impressive, coming in 5.4% below analysts’ estimates. Its non-GAAP loss of $0 per share was significantly below analysts’ consensus estimates.
Revenue: $14.26 billion vs analyst estimates of $13.8 billion (7.4% year-on-year decline, 3.3% beat)
Adjusted EPS: $0 vs analyst estimates of $0.12 (miss)
Adjusted Operating Income: $1.37 billion vs analyst estimates of $544.8 million (9.6% margin, beat)
Revenue Guidance for Q1 CY2025 is $12.2 billion at the midpoint, below analyst estimates of $12.9 billion
Adjusted EPS guidance for Q1 CY2025 is $0.00 at the midpoint, below analyst estimates of $0.09
Operating Margin: 2.9%, down from 16.8% in the same quarter last year
Free Cash Flow was -$1.50 billion compared to -$1.31 billion in the same quarter last year
Inventory Days Outstanding: 128, down from 137 in the previous quarter
Market Capitalization: $85.18 billion
“The fourth quarter was a positive step forward as we delivered revenue, gross margin and EPS above our guidance,” said Michelle Johnston Holthaus, interim co-CEO of Intel and CEO of Intel Products.
Company Overview
Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ:INTC) is a leading manufacturer of computer processors and graphics chips.
Processors and Graphics Chips
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Intel’s demand was weak over the last five years as its sales fell at a 5.9% annual rate. This fell short of our benchmarks and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Intel Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Intel’s recent history shows its demand has stayed suppressed as its revenue has declined by 8.2% annually over the last two years.
Intel Year-On-Year Revenue Growth
This quarter, Intel’s revenue fell by 7.4% year on year to $14.26 billion but beat Wall Street’s estimates by 3.3%. Company management is currently guiding for a 4.1% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Intel’s DIO came in at 128, which is 10 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.
Intel Inventory Days Outstanding
Key Takeaways from Intel’s Q4 Results
We liked that revenue and operating income beat in the quarter. On the other hand, its revenue and EPS guidance for next quarter both missed significantly. Management said that "Our Q1 outlook reflects seasonal weakness magnified by macro uncertainties, further inventory digestion and competitive dynamics." Overall, the quarter was solid, but the outlook was below expectations. The stock traded up 1% to $20.29 immediately after reporting, likely reflecting a relief that results were not worse, as the company has reported some highly disappointing quarters in the last year.
