Intel (INTC) shares witnessed a sharp decline of more than 10% in premarket trading on Friday, reacting to the chipmaker’s fourth-quarter results that exceeded estimates but were overshadowed by a disappointing outlook for the first quarter.
For Q1 2024, Intel projected adjusted earnings per share at $0.13, significantly below the expected $0.34, and forecasted revenue between $12.2 billion-$13.2 billion, falling short of the anticipated $14.2 billion. Despite reporting Q4 adjusted earnings per share of $0.54 (surpassing the expected $0.44) and revenue of $15.4 billion (beating the expected $15.2 billion), the market response was dominated by concerns about future performance.
Intel’s Data Center and AI unit results were particularly concerning, with Q4 revenues reaching $4 billion, below the Street’s estimate of $4.1 billion, marking a 10% decline from the same quarter the previous year. This segment, viewed as Intel’s opportunity to compete with rivals like Nvidia and AMD, faces challenges despite the unveiling of the Gaudi3 accelerator for generative AI software.
On a positive note, the Client Computing Group posted Q4 sales of $8.8 billion, surpassing the forecasted $8.4 billion, representing a 33% increase from the previous year. Intel’s pursuit of becoming a foundry for other chip companies is ongoing, with its Intel foundry services division generating $291 million in Q4, slightly below the expected $343 million.
Despite the recent opening of a new chip manufacturing facility in New Mexico and ongoing efforts to regain semiconductor leadership, Intel’s stock experienced a significant premarket decline. The company’s CEO, Pat Gelsinger, emphasized a relentless focus on achieving process and product leadership, expanding the external foundry business, and bringing AI to various applications.
Intel’s Core Ultra line of chips, introduced in December, aims to boost PC sales, featuring a neural processing unit (NPU) for running AI applications locally. However, the practical utility of onboard AI remains uncertain, with Intel acknowledging the challenge of defining future AI applications beyond early examples like local ChatGPT-like apps and AI image-editing software.