Source: Wall Street News

Recent financial reports show that in the face of weak demand in the data center and personal computer (PC) market, it still lags behind people in the field of artificial intelligence (AI)$Intel (INTC.US)$Reclaiming the status of the chip king is not easy, and the recovery process may be slower than Wall Street expected.

In the first quarter of this year, Intel's sales revenue and profit were higher than analysts' expectations, but the second quarter's guidance fell short of expectations, sounded a wake-up call. It means Intel CEO Pat Gelsinger (Pat Gelsinger)'s efforts to revive the company may take longer, and the investment in it may be greater.

After the announcement of financial results and guidelines, Intel's after-market share price dived, which closed up nearly 1.8% on Wednesday. The post-market decline was more than 9%. The post-market decline narrowed somewhat, and still fell more than 8%.

After Intel's stock price plummeted after the market, some netizens commented on social media X that it is possible that in the near future, Micron Technology's market value may surpass Intel. It's unbelievable that commercial chips will beat logic chips.

Some netizens believe that Intel should bring a good example of value traps to every investment common sense class. Whenever Intel is “very cheap,” TTM metrics that go back in time look fantastic.

Some netizens quoted a chart showing free cash flow in the top 100 US stocks as saying that Intel has now burned most of its cash.

First quarter revenue and profit were higher than expected Second quarter revenue, profit, and gross margin guidelines were lower than expected

After the market on Thursday, April 25, EST, Intel announced:

• Intel's revenue for the first quarter increased 9% year over year to US$12.72 billion, in line with the average value of the range of 12.2 billion to 13.2 billion US dollars in its own guidance range.

• Adjusted earnings per share (EPS) for the first quarter on a non-NAAP scale was $0.18. According to my own guidance and analysts' expectations, it was $0.13, and a loss of $0.2 per share for the same period last year.

• The gross margin, an indicator reflecting the efficiency of manufacturing operations, was 45.1% in the first quarter, higher than its own guideline of 43.5%.

In terms of performance guidance, after the first-quarter guidance fell far short of expectations, the second-quarter guidance provided by Intel this time fell short of expectations.

Intel expects:

• Revenue for the second quarter was US$12.5 billion to US$13.5 billion, and the entire guidance range fell short of analysts' expectations of US$13.63 billion.

• Intel's projected gross margin of 43.5% is lower than analysts' expectations of 45.3%, and far below Intel's own historical level of more than 60%.

Intel's chief financial officer (CFO) David Zinsner said that revenue for the first quarter was in line with the company's expectations, and the new foundry operation model has improved transparency and accountability, and is already driving the entire company to make better decisions. The company expects to achieve year-over-year revenue growth and non-GAAP EPS growth in fiscal year 2024, and increase gross margin by about 200 basis points throughout the year.

According to Zinsner, Intel has also made progress in controlling costs, and its manufacturing business is expected to balance the balance of payments “in the next few years.”

In the first financial report of the foundry business, “Independence” lost 2.5 billion US dollars in the first quarter, almost doubling from the previous quarter

The first quarter was the first quarter of Intel's financial reporting format changes. For the first time, Intel merged the chip manufacturing outsourcing business — IFS — with foundry technology development, foundry manufacturing, and supply chain into Intel Foundry to account for its quarterly revenue and profit and loss separately.

In the first quarter, Intel also integrated other major businesses, divided into two new business blocks. One was to merge the client business CCG, data center and AI (DCAI), and network and edge domain (NEX), which is the PC chip business, into “Intel products,” and the other was to merge Intel's business Altera, an autonomous driving technology company, and Mobileye, an autonomous driving technology company, and other startups into “others.”

Financial reports show that

• The revenue of CCG, Intel's largest source of revenue, increased 31% year-on-year to 7.5 billion US dollars in the first quarter, increasing by more than 30% for two consecutive quarters, indicating that the PC market has bottomed out and rebounded.

• The second-largest business data center and AI (DCAI) revenue for the first quarter was US$3 billion, up 5% year on year, reversing a 7.4% year-on-year decline in the fourth quarter of last year.

• Network and Edge Area (NEX) revenue for the first quarter was US$1.4 billion, down 8% year on year. The decline was significantly mitigated from 28.6% in the fourth quarter of last year.

• The first quarter revenue of the foundry business was US$11.9 billion, up 17% year on year, while the revenue of IFS in the fourth quarter of last year increased 63.5% year over year.

• The first quarter revenue of all other businesses fell 46% year over year to US$775 million. Among them, Altera's first quarter revenue fell 58% year over year to US$342 million; Mobileye's first quarter revenue fell 48% year over year to US$239 million, compared to 12.7% year on year in the fourth quarter of last year.

At the beginning of this month, Intel separately disclosed the profit and loss of the foundry business for the first time. The business's operating loss last year increased by 34.6% compared to 2022 to US$7 billion, and revenue fell 31.2% year over year to US$18.9 billion. At the time, Intel expected operating losses in the foundry business to peak this year and achieve break-even around 2027.

This Thursday's financial report shows that the OEM business lost 2.5 billion US dollars in the first quarter, almost double the loss of 1.3 billion US dollars in the fourth quarter of last year. The operating profit margin of the business in the first quarter was -56.6%, far exceeding 25.5% in the fourth quarter of last year.

CEO: I am confident that the revenue of Gaudi AI chips may exceed 500 million US dollars this year for consecutive quarters.

Despite poor guidance for the quarter, Intel management has high hopes for the second half of the year. They say they are confident of plans to increase revenue over the 2024 quarter and that the company is on track to regain leadership in the processor market by 2025. CEO Kissinger said that with mass production of the Intel 3 process, Intel is producing cutting-edge semiconductors in the US for the first time in nearly ten years. Along with the development of the foundry business, Intel is expected to return to a leading position in terms of manufacturing processes next year.

Kissinger said the company is confident of plans to drive continuous quarterly growth throughout the year as we accelerate the pace of artificial intelligence (AI) solutions and relentlessly focus on execution, operational discipline, and value creation for shareholders in a dynamic market.

Earlier this month, Intel released a new generation of AI chips, Gaudi 3, which claims to have significantly superior performance$NVIDIA (NVDA.US)$The main AI chip is H100. According to Intel, Gaudi 3 can reduce the training time of the LLAMA2 and GPT-3 models by an average of 50% compared to the H100, increase the inference throughput of the Llama and Falcon models by an average of 50% compared to the H100, and increase the inference speed by 30% compared to the Nvidia H200.

Following the announcement of earnings this Thursday, Kissinger revealed that the revenue of Gaudi's AI chip product line may exceed 500 million US dollars this year. He said, “What excites me the most is the corporate customer. I think the ultimate monetization of AI is when it starts to transform businesses.”

Editor/jayden