Intel’s share price fell in the premarket on Friday, January 26, after the chip manufacturer published an outlook for the first quarter of the current year, which turned out to be worse than analysts’ expectations, although the company’s results for the last three months of 2023 exceeded Wall Street estimates.
The mentioned firm predicts that for the period from January to March 2024, its earnings per share will be 13 cents with sales in the range of $12.2 billion to $13.2 billion. LSEG expected earnings per share to be 33 cents on revenue of $15.15 billion.
Intel CEO Pat Gelsinger, during a telephone conversation with analysts, said that the company’s main business areas are personal computers and server chips. According to him, in the first quarter of 2024, the firm’s overall sales will take a hit due to the weakness of subsidiaries, including Mobileye and its unit of programmable microcircuits. He also noted a decrease in revenue in other areas of activity.
Pat Gelsinger stated that Intel characterizes the core business as healthy. According to him, there is currently no reason to claim that the company risks facing a reduction in its market share. He also stated that the growth in popularity of the brand’s products is being recorded.
Intel reported that in the fourth quarter of last year, its sales increased by 10% compared to the figure for the same period in 2022, amounting to $15.4 billion. Also, in 2023, the company’s share price increased by more than 70%. Data from the research firm Gartner indicates that Intel is currently the largest semiconductor manufacturer by revenue, although the brand is inferior to Nvidia and AMD in terms of such an indicator as market capitalization.
Cloud providers and large technology companies are focused on the boom of artificial intelligence. Against this background, Nvidia’s position has significantly strengthened. In the past, the most important part of the server was the central processor made by Intel. Currently, artificial intelligence servers can have up to eight Nvidia or AMD GPUs attached to one or two Intel processors.
The company’s total profit last year was $54.2 billion. This figure is 14% lower than the result for 2022.
Over the past few quarters, there has been some redistribution of the share of wallets in data centers between accelerators and processors. This was stated by Intel CFO David Zinsner during a telephone conversation with analysts
Pat Gelsinger is the author of the firm’s five-year development plan. This business strategy aims to catch up to Taiwan Semiconductor Manufacturing Company in its ability to offer production services and simultaneously improve chips.
Intel’s Foundry Services business, related to making microcircuits for other brands, is currently in the recovery phase. This line of business brought the company revenue of $291 million for the fourth quarter of 2023, which is 63% higher than the result for the same period in 2022.
Intel is also currently implementing a cost-cutting strategy. As part of these measures, the company reduces its workforce and offloads small parts of its business. David Zinser said that in 2023 Intel managed to cut costs by $3 billion.
Intel’s largest unit is the eComputing group, associated with the business of manufacturing processors for laptops and personal computers. In 2023, the PC industry began to show signs of recovery after several years of downturn. Sales of the specified unit for the fourth quarter of last year amounted to $8.8 billion, which is 33% higher than the result for the same period in 2022.
Pat Gelsinger says that the demand for chips for personal computers has returned to normal. He also noted that sales of the relevant products were at a high level in the gaming and commercial sectors. Separately, Mr. Gelsinger said that Intel expects the PC market to expand in 2024.
Intel’s second-largest unit, Data Center and AI recorded a 10% drop in sales volumes for the fourth quarter of 2023 compared with the result for the last three months of 2022. In monetary terms, this figure is equal to $4 billion. The mentioned unit specializes in server processors and GPU systems.
Intel Network and Edge, which sells components for carrier systems and communication networks, recorded sales of $1.5 billion in the fourth quarter of 2023, which is 24% less year-on-year.
David Zinsner said Intel expects its data center business to consistently shrink by double-digit percentages in the first quarter of the current year compared to the last quarter of 2023.
Bygone year the company paid $3.1 billion in dividends.
As we have reported earlier, Intel and DigitalBridge Establish Generative AI Company.