Intel released its financial results for the fourth quarter of 2023 (as of December 2023) after the U.S. stock market on the morning of January 26, 2024, Beijing time, with the following highlights:
1. Core data: The data exceeds expectations, and the actual business is in line with expectations. Intel reported revenue of $15.4 billion in the fourth quarter of 2023, slightly beating market expectations of $15.2 billion. Revenue continued to increase sequentially in the quarter, mainly due to the recovery of the PC client business. Intel's net profit in the fourth quarter of 2023 was $2.669 billion, a year-on-year turnaround, exceeding market expectations ($957 million). The performance of the profit side was mainly due to restructuring and other changes in expenses.
2. Various business conditions: the client is improving, but the data center is difficult to grow. The client business and the data center and AI business are the largest sources of revenue for the company, accounting for more than 80% of the total revenue.
1) Client business: Benefiting from the recovery of the PC market from the bottom, the company's PC client business also grew significantly, with client revenue of US$8.844 billion in the quarter, a year-on-year increase of 33.5%, exceeding market expectations (US$8.455 billion);
2) Data center and AI: Although the data center market is booming, Intel has rarely seen growth, maintaining a revenue level of $4 billion. The addressable market for CPUs is shrinking, and companies are also being affected by competitive pressures and inventory corrections. With the successive entry of competitors, the competitive pressure of the company is still increasing.
3. Intel's performance guidance: expected revenue of $12.2-13.2 billion in the first quarter of 2024 (consensus of $14.27 billion) and gross margin of 40.7% (consensus of 42.5%). Both revenue and gross margin fell short of expectations, mainly due to the increased competition in some businesses, which led to a decline in the company's performance.
Overall:
Judging from the data, Intel's revenue and net profit both exceeded market expectations. However, Dolphin Jun believes that the company's performance in this quarter is in line with expectations as a whole. Net profit performance was significantly better than market expectations, mainly due to the impact of other expenses such as restructuring. If the impact is excluded, the company's operating profit is basically close to market expectations.
In terms of subdividing various businesses, the company's client business continued to improve in this quarter, which is also in line with the industry performance of the recovery at the bottom of the PC market. However, another focus of the market is that data centers have not seen significant growth in the quarter, revealing the company's lack of competitiveness.
Combined with the performance guidance for the next quarter, the company expects expected revenue of $12.2-13.2 billion in the first quarter of 2024 (consensus expectation of $14.27 billion) and gross margin of 40.7% (consensus expectation of 42.5%), both of which have declined significantly. Although some of this is due to seasonal factors, the magnitude also reveals that some of the company's business faced another decline in the first quarter.
Dolphin Jun once mentioned in "Intel: AI PC, Is it a lifesaver for the "toothpaste factory"?", "The growth of Intel's data center and AI business has come to a standstill, mainly because the company's position in the market has been weakened." The data center business's share of revenue from the three vendors (Intel, Nvidia, AMD) dropped from 70% to 20%." Intel's revenue share in the data center market will continue to decline as competitors enter the market. This quarter's earnings report once again confirmed this.
Toothpaste factories are no longer leading, and they need to catch up and gain a foothold in the data center and AI market through the improvement of product strength. Otherwise, it will only be thrown farther and farther away.
The following is Dolphin's specific analysis of Intel:
1. Core data: The data exceeded expectations, and the actual business was in line with expectations
1.1 Revenue: Intel achieved revenue of $15.4 billion in the fourth quarter of 2023, slightly exceeding market expectations ($15.2 billion). Revenue continued to increase sequentially in the quarter, mainly due to the recovery of the PC client business.
1.2 Gross profit and gross margin: Intel achieved gross profit of $7.047 billion in the fourth quarter of 2023, a year-on-year increase of 28.1%. In terms of gross profit margin, the company's gross profit margin in the quarter was 45.7%, which continued to rise quarter-on-quarter. The recovery in gross profit margin was mainly due to the higher profitability of the client business and the increase in the proportion of Mobileye.
1.3 Operating expenses: Intel's operating expenses in the fourth quarter of 2023 were $4.462 billion, a year-on-year decrease of 32.7%. The decrease in operating expenses was mainly due to restructuring and other related expenses.
The core part of the view:
1) R&D expenses: R&D expenses for the quarter were US$3.987 billion, down 10.7% year-on-year. The R&D expense ratio decreased to 25.9%, and R&D investment was still the largest item in the company's operating expenses.
2) Sales and administrative expenses: Selling and administrative expenses decreased by 5.2% year-on-year to US$1,617 million, and the sales and administrative expense ratio remained at around 10% at 10.5%.
1.4 Net profit: Intel's net profit in the fourth quarter of 2023 was $2.669 billion, a year-on-year turnaround, exceeding market expectations ($957 million). The increase in the company's performance during the quarter was mainly due to restructuring and other expense changes. Excluding the impact of nearly $1.6 billion year-on-year, the company's operating performance is similar to market expectations.
2. Segmentation of data: AI that is difficult to compete
Intel's business consists of Client Business, Data Center & AI, Network & Edge Domain, Mobileye, and Foundry Services. Among them, the client business, data center and AI business are the largest sources of revenue for the company, accounting for more than 80% of the total.
2.1 Client Revenue
Intel's client revenue in the fourth quarter of 2023 was $8.844 billion, up 33.5% year-over-year, and was the only one of its businesses that exceeded expectations ($8.455 billion). In the business, both Desktop and Notebook have significantly rebounded, mainly benefiting from the bottoming out of the PC market.
Judging from industry data, global PC shipments have rebounded to about 70 million units in a single quarter after experiencing a bottom of more than 50 million units in a single quarter. The year-on-year growth rate has gradually declined from a double-digit decline to a positive one. Intel's client business will benefit from the changes in the PC industry from the bottom.
2.2 Data Center and AI
Intel's data center and AI revenue reached $3.985 billion in the fourth quarter of 2023, down 7.4% year-over-year.
The data center and AI business is the company's second largest source of revenue, and it is also the business that the market hopes for. While demand for data centers remains strong, business revenues have been slow to make breakthroughs.
The year-over-year decline in the quarter was primarily due to the shrinking addressable market for CPUs, while the company was also impacted by competitive pressures and inventory revisions. With the successive entry of competitors, the competitive pressure of the company is still increasing.
2.3 Network and edge domains
Intel's network and edge domain revenue reached $1.471 billion in the fourth quarter of 2023, down 28.6% year-over-year.
The network and edge domain business also continued to be sluggish, with the company impacted by continued weak demand and increased customer inventories.
2.4 Other major businesses
1) Intel's Mobileye revenue was $637 million in the fourth quarter of 2023, up 12.7% year-over-year.
The Mobileye business is a year-over-year growth business in addition to the client business, mainly driven by the increase in EyeQ shipments.
2) Intel's foundry services revenue was $291 million in the fourth quarter of 2023. Combined with the first two quarters, the company's wafer foundry services have not improved significantly, and the current scale is still maintained at about 300 million US dollars.
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