Intel Stock Dips After Earnings Report: Is it a Buy?

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Written By Sylvia Thompson

Intel’s Stock Takes a Hit Post-Q4 Results

Intel Corporation (INTC) experienced a significant downturn in its stock value on Friday, with a decline of over 10%.

Credit: DepositPhotos

This drop occurred following the release of its fourth-quarter results, which, although surpassing estimates, projected a less optimistic outlook for the first quarter than analysts had anticipated.

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First Quarter Forecasts Miss Analyst Expectations

For the upcoming quarter, Intel projects earnings per share at $0.13, with revenues in the range of $12.2 billion to $13.2 billion.

Analysts had expected higher figures, with projections of $0.34 per share on $14.2 billion in revenue. This discrepancy in expectations has raised concerns among investors and analysts alike.

Data Center and AI Business Facing Declines

Intel’s CFO David Zinsner highlighted the expected double-digit percentage decline in the company’s Data Center and AI business for the first quarter. Despite these concerns, CEO Pat Gelsinger noted that such declines are part of a typical seasonal pattern.

The previous quarter also saw this segment underperform, missing Wall Street’s revenue projection of $4.1 billion by $100 million.

Optimism for Future Growth in Key Segments

Despite the immediate challenges, both Zinsner and Gelsinger are optimistic about the growth prospects of this segment beyond the first quarter.

The Data Center and AI division is crucial for Intel as it competes with industry giants like Nvidia (NVDA) and AMD (AMD).

In December, Gelsinger showcased the upcoming Gaudi3 accelerator, reflecting Intel’s commitment to advancing in the generative AI software and services sector.

Fourth-Quarter Performance Exceeds Expectations

Intel reported a stronger fourth-quarter performance than analysts had predicted, with an adjusted EPS of $0.54 and revenues of $15.4 billion.

This performance exceeded the forecasted $0.44 EPS and $15.2 billion in revenue.

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Client Computing Group Shows Strong Sales

The company’s Client Computing Group, its main revenue generator, posted impressive fourth-quarter sales of $8.8 billion.

This figure not only surpassed the forecasted $8.4 billion but also marked a significant 33% increase from the previous year. With expectations of a PC market rebound in 2024, this group’s performance is critical to Intel’s success.

Innovation in Core Ultra Chips

Intel is focusing on its Core Ultra line of chips to stimulate further growth in PC sales. These chips feature a neural processing unit (NPU), facilitating the running of certain AI applications directly on PCs without the need for cloud-based solutions.

Credit: DepositPhotos

However, the real-world utility of onboard AI for consumers remains to be fully understood.

Foundry Services and New Manufacturing Facility

Intel is also progressing with its plan to serve as a foundry for other chip companies. Despite falling short of revenue expectations, the Intel Foundry Services division is a key part of this strategy.

Additionally, the recent opening of a new chip manufacturing facility in New Mexico is a significant step in Intel’s broader effort to reclaim its leadership in the semiconductor industry.

Gelsinger’s Focus on AI and Long-Term Strategy

CEO Pat Gelsinger, speaking at the “AI Everywhere” event, underscored Intel’s commitment to integrating AI into its products.

He stressed the company’s dedication to achieving process and product leadership, expanding its external foundry business, and driving AI integration as part of its long-term strategy for stakeholder value.

Intel’s Stock Performance and Market Dynamics

Before the recent downturn, Intel’s stock had seen a substantial 45% increase over six months, illustrating the volatility and challenges in the tech market. Intel’s ongoing efforts to adapt and innovate remain crucial in the highly competitive semiconductor sector.

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