Intel Issues Weak Forecast Amid Economic Challenges

Intel recently shared a disappointing forecast for its upcoming quarter, highlighting several challenges facing the company. The chipmaker cited seasonality, competition, and an uncertain economic landscape as significant factors impacting its business outlook.

At a recent event, co-CEO Michelle Johnston Holthaus discussed Intel's position while showcasing the Intel Core Ultra processor. Despite issuing weak forecasts, Intel's latest earnings report showed that the company managed to exceed estimates in terms of earnings and revenue.

Performance Overview

For the fourth quarter, Intel reported earnings and revenue figures that topped analysts’ expectations. The adjusted earnings per share came in at 13 cents, compared to the anticipated 12 cents. Revenue for the quarter reached $14.26 billion, surpassing the estimate of $13.81 billion. However, it is important to note that this revenue reflects a decline of 7% compared to the same period last year.

In contrast to the positive earnings report, Intel suffered a net loss of $126 million, or 3 cents per share. This marks a significant decrease from the net income of $2.67 billion, or 63 cents per share, reported in the same quarter the previous year. This report also marked the first since the announcement of CEO Pat Gelsinger's exit, who faced challenges during his tenure, including losing market share and falling behind in the artificial intelligence sector.

Leadership Changes

Following Gelsinger's departure, Intel appointed two interim co-CEOs: chief financial officer David Zinsner and Intel Products CEO Johnston Holthaus. Holthaus stated they are taking steps to improve Intel's competitive edge and enhance shareholder value. The adjusted results from the earnings report exclude stock-based compensation, acquisition-related adjustments, and interest on a previous fine from the European Commission.

Future Expectations

Looking ahead to the first quarter, Intel anticipates a breakeven profit with projected revenue between $11.7 billion and $12.7 billion. Analysts had expected revenue of $12.87 billion and adjusted earnings per share of 9 cents. Management highlighted that clients are currently managing their inventory levels, which is affecting demand for Intel's products.

Intel’s Client Computing Group, which focuses on PC chips, generated $8.02 billion in revenue during the fourth quarter. While this number is a 9% decline year-over-year, it exceeded the $7.84 billion consensus among analysts. The Data Center and Artificial Intelligence segment contributed $3.39 billion, slightly down from the previous year but aligning with analyst estimates. Furthermore, the Network and Edge division generated $1.62 billion, marking a 10% increase from the prior year’s figures.

Government Support

During the quarter, Intel successfully secured a significant $7.86 billion grant from the U.S. government aimed at supporting manufacturing efforts in four states. This financial backing is expected to play a vital role in bolstering Intel's operations moving forward.

As of the close of trading before the earnings report, Intel's shares remained flat for the year, while the S&P 500 index posted a modest increase of about 3%.

Intel will be discussing these results in detail during a conference call with analysts expected to take place at 5 p.m. ET.

Intel, Earnings, Forecast