The Intel Earnings Report: What to Expect in Q1 2024

Key Takeaways

• Intel is set to report earnings for the first quarter of 2024 on Thursday after the closing bell.
• Analysts expect Intel’s revenue and income to grow year-over-year, but to fall from the prior quarter due to a seasonal decline.
• The company will report data-center and artificial intelligence revenue, which could provide insight into customer demand.
• Intel could also provide updates on its foundry business while in the process of transitioning the semiconductor manufacturing segment into a more independent unit.

Intel (INTC) is gearing up to release its first-quarter earnings report after the closing bell on Thursday. Investors are eagerly awaiting insights into the company’s performance, particularly in terms of data center and artificial intelligence (AI) revenue growth, as well as any updates on its foundry business.

Analysts have projected Intel’s revenue for the first quarter of 2024 to be around $12.95 billion. While this figure represents a decline from the previous quarter, it is expected to be higher than the same period in 2023. Historically, Intel tends to experience a seasonal decline in the first quarter.

Adjusted net income is anticipated to be $593.5 million, marking a significant drop from the final quarter of 2023. However, this figure represents a positive turnaround from the same period the year before when the company recorded a net loss of $167 million. Analysts are also expecting adjusted diluted earnings per share (EPS) to come in at 14 cents, a significant improvement from a 4-cent loss in the same period a year earlier.

Key Metric: Data Center and AI Revenue

In addition to financial figures, Intel will also be reporting its data-center and AI revenue for the first quarter. This data is crucial as it provides valuable insights into customer demand for these products.

UBS analysts have noted that demand signals for traditional servers have turned favorable following a period of muted or declining spend. Competitors like Dell Technologies, Advanced Micro Devices (AMD), and Micron Technology have reported a rebound in demand, indicating a positive trend in the industry.

Intel’s data-center and AI units are expected to see a 6% increase from the previous quarter but remain flat year-over-year. This growth is attributed to hyperscale customers tapering growth on AI server spend and diverting capital to traditional compute in the coming quarters.

Despite facing stiff competition from peers like Nvidia and AMD in the AI space, Intel recently unveiled its latest AI chip, the Gaudi 3 AI accelerator, which the company claims outperforms Nvidia’s H100.

CFRA analyst Angelo Zino highlighted that while Intel may not pose an immediate threat to Nvidia, it provides customers with an additional option. The long-term focus for Intel lies in its foundry business, where it aims to catch up with leading-edge AI chip production.

Business Spotlight: Foundry Business

Intel recently announced a new reporting structure that separates its foundry or semiconductor manufacturing business from other segments. This move is part of Intel’s strategy to operate its foundry business as a more independent unit.

The new reporting structure revealed widening losses in Intel’s foundry business. The upcoming first-quarter report will include foundry revenue, allowing investors to assess key metrics for the semiconductor manufacturing segment.

Bank of America analysts emphasized that Intel’s foundry business’s ability to turn profitable in a competitive environment is crucial for the stock’s bull and bear cases. UBS analysts acknowledged that Intel’s foundry losses were expected but highlighted that the chipmaker’s costs are higher than those of competitors.

Looking ahead, UBS remains optimistic about profitability improving as Intel transitions away from structural cost challenges. However, they cautioned that significant profitability improvements may only materialize beyond 2027.

Intel shares have experienced a 32% decline year-to-date, closing at $34.20 on Friday.

As investors eagerly await Intel’s first-quarter earnings report, all eyes are on the company’s performance in key areas such as data center and AI revenue growth, as well as updates on its foundry business. Stay tuned for more insights following the earnings release.

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