Intel, one of the leading chipmakers in the world, has disclosed a first-quarter revenue forecast that has caused concern among investors and analysts. The company indicated that there could be a shortfall in revenue, citing uncertain demand for its chips in the traditional server and personal computer markets. This announcement led to a significant decline in shares during after-hours trading, potentially resulting in a $20 billion reduction in market value on Friday.
CEO Pat Gelsinger explained that the core businesses of PCs and servers were experiencing a seasonal low demand, coinciding with decreased demand in non-core areas such as auto chip firm Mobileye. While Intel is no longer providing full-year financial forecasts, the company highlighted $2 billion worth of orders for its AI chips and anticipated improved sales later in the year.
The chipmaker anticipates adjusted first-quarter revenue between $12.2 billion and $13.2 billion, contrasting with analysts’ average estimate of $14.50 billion. The forecasted first-quarter profit is 13 cents per share, excluding one-time items, while analysts expected 33 cents per share.
Intel’s gross margin has also been impacted by substantial AI investments, falling to the mid-30s in 2023 from prior highs of over 60 per cent. However, a mild recovery saw an adjusted gross margin of 45.8 per cent in the third quarter, with a reported fourth-quarter gross margin of 48.8 per cent.
Analysts suggest that Intel needs to shift its focus from the personal computer division to deliver solid profits from data centres and AI or face further stock declines. The year 2024 is considered a pivotal period for Intel, with analysts stating it will determine the company’s success in AI PCs and AI-enabling chips.
In conclusion, the market now awaits the upcoming moves from Intel leadership in response to the uncertainties and shifts in demand for its products. Opinion on the topic remains divided, with some analysts expressing confidence in Intel’s ability to bounce back, while others warn of further challenges ahead. The company’s strategic decisions and investments in emerging technologies will play a crucial role in shaping its future trajectory.