No Surprises In Intel's (NASDAQ:INTC) Q1 Sales Numbers But Stock Drops on Weak Guidance

Kayode Omotosho /
2024/04/25 4:08 pm EDT

Computer processor maker Intel (NASDAQ:INTC) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 8.6% year on year to $12.72 billion. On the other hand, next quarter's revenue guidance of $13 billion was less impressive, coming in 4.4% below analysts' estimates. It made a non-GAAP profit of $0.10 per share, improving from its loss of $0.04 per share in the same quarter last year.

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Intel (INTC) Q1 CY2024 Highlights:

  • Revenue: $12.72 billion vs analyst estimates of $12.78 billion (small miss)
  • EPS (non-GAAP): $0.10 vs analyst expectations of $0.14 (26.8% miss)
  • Revenue Guidance for Q2 CY2024 is $13 billion at the midpoint, below analyst estimates of $13.59 billion
  • EPS (non-GAAP) Guidance for Q2 CY2024 is $0.10 at the midpoint, below analyst estimates of $0.26
  • Gross Margin (GAAP): 41%, up from 34.2% in the same quarter last year
  • Inventory Days Outstanding: 139, up from 121 in the previous quarter
  • Free Cash Flow was -$6.18 billion compared to -$1.31 billion in the previous quarter
  • Market Capitalization: $146.9 billion

“We are making steady progress against our priorities and delivered a solid quarter,” 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.

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 by 9.5% on average per year. But as you can see below, this was a strong quarter for the company, with revenue growing from $11.72 billion in the same quarter last year to $12.72 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

Intel had a slow quarter as its unremarkable 8.6% year-on-year revenue growth missed analysts' estimates by 0.4%. Despite these results, we believe Intel is still in the early days of an upcycle, as this was just the second consecutive quarter of growth and a typical upcycle tends to last 8-10 quarters.

Intel's management team believes its revenue growth will continue, guiding to 0.4% year-on-year growth next quarter. Analysts expect the company to grow its revenue by 7.9% over the next 12 months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity 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.

Intel Inventory Days Outstanding

This quarter, Intel's DIO came in at 139, which is 26 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.

Key Takeaways from Intel's Q1 Results

We were impressed by Intel's strong gross margin improvement this quarter. We were also glad its operating margin improved. On the other hand, its revenue missed. Looking ahead, revenue and EPS guidance for next quarter both missed analysts' expectations by a meaningful magnitude. Overall, this was mediocre quarter for Intel. The company is down 6% on the results and currently trades at $33.05 per share.

Intel may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.