Intel (NASDAQ:INTC) Reports Q3 Results, Stock Drops

Adam Hejl /
2021/10/21 4:17 pm EDT
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Computer processors maker Intel (NASDAQ:INTC) reported Q3 FY2021 results beating Wall St's expectations, with revenue up 4.68% year on year to $19.1 billion. Guidance also came in very strong with next quarter revenues guided to $19.2 billion, or 5.17% above analyst estimates. Intel made a GAAP profit of $6.82 billion, improving on its profit of $4.27 billion, in the same quarter last year.

Is now the time to buy Intel? Access our full analysis of the earnings results here, it's free.

Intel (INTC) Q3 FY2021 Highlights:

  • Revenue: $19.1 billion vs analyst estimates of $18.2 billion (5.02% beat)
  • EPS (non-GAAP): $1.71 vs analyst estimates of $1.11 (53.6% beat)
  • Revenue guidance for Q4 2021 is $19.2 billion at the midpoint, above analyst estimates of $18.2 billion
  • Free cash flow of $5.89 billion, up 14.5% from previous quarter
  • Inventory Days Outstanding: 106, up from 95 previous quarter
  • Gross Margin (GAAP): 55.9%, up from 53.1% same quarter last year

“Q3 shone an even greater spotlight on the global demand for semiconductors, where Intel has the unique breadth and scale to lead. Our focus on execution continued as we started delivering on our IDM 2.0 commitments. We broke ground on new fabs, shared our accelerated path to regain process performance leadership, and unveiled our most dramatic architectural innovations in a decade. We also announced major customer wins across every part of our business,” said Pat Gelsinger, Intel CEO.

Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ: INTC) is the leading manufacturer of computer processors and graphics chips.

Sales Growth

Intel's revenue growth over the last three years has been slow, averaging 4.66% annualy. And as you can see below, last year has been even less strong, with quarterly revenue growing from $18.3 billion to $19.1 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Intel Total Revenue

While Intel's revenues beat analyst estimates by 5.02%, this was a very slow quarter with just 4.68% revenue growth.

Year on year revenue growth went from negative to positive this quarter, but Intel is guiding towards a return to revenue declines of 8.63% next quarter and analysts agree, with analyst consensus forecasting revenue declining 7.85% over the next twelve months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as the cyclical nature of semiconductor supply and demand impacts profitability. In a tight supply environment, inventories tend to be low, allowing chipmakers to exert pricing power, which helps increase gross margins. The inverse also applies, as rising inventory levels tend to foreshadow weakening pricing power and declining gross margins.

Intel Inventory Days Outstanding

This quarter, Intel’s inventory days came in at 106, 7 days above the five year average, suggesting that that inventory has grown to higher levels than what we used to see in the past.

Key Takeaways from Intel's Q3 Results

Sporting a market capitalization of $224 billion, more than $34.6 billion in cash and with positive free cash flow over the last twelve months, we're confident that Intel has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in Intel’s gross margin this quarter. And we were also glad that the revenue guidance for the rest of the year was upgraded. On the other hand the revenue growth was quite weak. Overall, this quarter's results still seemed pretty positive but it seems that some shareholders expected more as the company is down 6.3% on the results and currently trades at $52.5 per share.

Should you invest in Intel right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.