Computer processor maker Intel (NASDAQ:INTC) missed analyst expectations in Q4 FY2022 quarter, with revenue down 31.5% year on year to $14 billion. Intel made a GAAP loss of $661 million, down on its profit of $4.62 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) Q4 FY2022 Highlights:
- Revenue: $14 billion vs analyst estimates of $14.4 billion (3.1% miss)
- EPS (non-GAAP): -$0.15 vs analyst estimates of $0.20 (-$0.35 miss)
- Revenue guidance for Q1 2023 is $11 billion at the midpoint, below analyst estimates of $14 billion
- Free cash flow of $3.06 billion, up from negative free cash flow of $6.3 billion in previous quarter
- Inventory Days Outstanding: 141, up from 133 previous quarter
- Gross Margin (GAAP): 39.1%, down from 53.6% same quarter last year
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.
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth
Intel's revenue has been declining over the last three years, dropping annually on average by 3.06%. Last year the quarterly revenue declined from $20.5 billion to $14 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).
This was a difficult quarter for Intel, with revenue declining 31.5%, missing analyst estimates by 3.1%.
Intel's looks headed into the trough of the semi cycle, as it is guiding to revenue declines of 40% YoY next quarter, and analysts are estimating 3.15% declines over the next twelve months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.
This quarter, Intel’s inventory days came in at 141, 36 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 Q4 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Intel’s balance sheet, but we note that with a market capitalization of $122 billion and more than $28.3 billion in cash, the company has the capacity to continue to prioritise growth over profitability.
We struggled to find many strong positives in these results. On the other hand, it was less good to see that the revenue growth was quite weak, investory has been building up and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is down 7.11% on the results and currently trades at $27.94 per share.
Intel may have had a tough quarter, but does that actually create an opportunity to invest 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.