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The past year has been a terrible one for Intel (NASDAQ: INTC) investors as share prices of the once-mighty semiconductor giant have fallen 55%, driven by the company's inability to capitalize on hot technology trends such as artificial intelligence (AI) and market share losses to rivals.
However, Chipzilla's fourth-quarter 2024 results (which were released on Jan. 30) did provide a glimmer of hope to investors, even if for a brief period. The stock rose initially after the results were released as it beat Wall Street's estimates, but it wasn't long before it retreated nearly 3% as more details emerged.
Let's see why that was the case and check if Intel's latest results were good enough to warrant a buy.
Intel may have exceeded expectations, but it isn't out of the woods yet
Intel's fourth-quarter revenue of $14.3 billion was down 7% from the year-ago period. Analysts were projecting a bigger fall as they anticipated revenue of $13.8 billion for the quarter. However, investors should note that Intel's revenue beat was powered by the $1.1 billion grant it received in Q4 under the CHIPS Act. Management also added on the earnings conference call that it suspects a "portion of Q4 revenue upside was due to customers' hedging against potential tariffs."
Not surprisingly, Intel's revenue outlook of $12.2 billion for the current quarter is below expectations of $12.87 billion. The midpoint of its revenue guidance points toward a 4% decline in its top line on a year-over-year basis. However, Intel's adjusted earnings per share would fall from $0.18 per share in the year-ago quarter to breakeven in the current quarter.
In simpler words, the contraction in Intel's revenue and earnings is here to stay. That makes buying Intel right now a risky move considering that nearly all of its business segments are struggling. For instance, the company's revenue from sales of central processing units (CPUs) used in laptops and desktops was down 9% year over year in the previous quarter. That's in stark comparison to Advanced Micro Devices, which has been taking share away from Intel and has been enjoying impressive growth in this market.
Meanwhile, the 3% year-over-year decline in Intel's data center and AI revenue clearly indicates that it has missed the bus in this market as well. Both AMD and Nvidia have been reporting solid growth in sales of their server CPUs and data center graphics cards used for training and deploying AI models. Intel, however, is writing off the inventory of its Gaudi AI accelerators and scrapped its goal of achieving $500 million in revenue from sales of these chips.