January 30, 2025
(Bloomberg) -- Intel Corp. reported better-than-feared fourth-quarter revenue, but warned that its return to competitiveness will take time.
While the $14.3 billion in fourth-quarter sales beat estimates, part of that was from customers ordering ahead of possible US tariffs, the company’s leaders said. First-quarter sales will fall short of analysts’ projections because of weaker demand and competitive pressure, they cautioned.
First-quarter revenue will be $11.7 billion to $12.7 billion, the Santa Clara, California-based semiconductor company said Thursday in a statement, missing the $12.85 billion average analyst estimate. Profit excluding some items will be break-even, compared with the 8 cents a share analysts were projecting.
The chipmaker didn’t give a status update on its search for a new CEO. The eventual new leader is expected to address options that include a breakup. Bloomberg and other media outlets have reported that competitors are considering bids for all or parts of the company.
Meanwhile, interim leaders said they are focused giving realistic projections that they feel the company can meet, and won’t commit resources speculatively.
“We’ve got to be prudent around the uncertainty across the markets,” Chief Financial Officer and interim CEO David Zinsner said in an interview.
In the fourth quarter, the company had a loss of 3 cents a share, excluding certain items.
Intel gained as much as 3.2% in extended trading, after closing at $20.01 in New York. The shares have lost more than 50% of their value in the last 12 months.
Intel, until recently the world’s largest chipmaker, ended 2024 with its lowest revenue in more than a decade after posting a third straight-annual decline. CEO Pat Gelsinger was pushed out in December by the board, which cited a need for more competitive products.
Gelsinger, who rejoined Intel as CEO in 2021 to turn it around, had insisted Intel was better kept whole and that his expensive spending plan would return its manufacturing and products to industry prominence. He didn’t last the five years he said it would take for his plan to bear fruit.
Investors, who initially supported his initiatives, deserted the company’s stock when the spending on new plants, equipment and research took a massive toll on finances. Meanwhile, rivals better exploited an industry shift to artificial intelligence technology, eroding Intel’s market share. Gelsinger partially addressed the issue by reducing spending and cutting 16,000 jobs, but Intel still needs to improve its chips, particularly artificial intelligence accelerators, in order to restore top-line growth.
Intel has been unable to produce a viable alternative to Nvidia Corp.’s accelerator chips, products that are delivering more than $100 billion in annual revenue for that company. Meanwhile, longtime rival Advanced Micro Devices Inc. is eating away at Intel’s market share in personal computer and server processors, and other companies using mobile-phone derived processors are trying to break in to Intel’s biggest market. Taiwan Semiconductor Manufacturing Co. now has the best technology in the industry and is providing outsourced manufacturing to Intel’s rivals, taking away what used to be its main advantage.
Michelle Johnston Holthaus, who heads Intel’s product division and is also interim co-CEO, said that while Intel’s new PC chips are competitive it still has work to do to offer better server chips for data centers.
“We’re fighting really hard to close the gap,” she said. “We certainly have more work to do.”
Gross margin, or the percentage of sales remaining after excluding the cost of production, was 39.2% in the fourth quarter and will be 33.8% in the current period. At its peak, Intel regularly reported gross margin of well above 60%. Nvidia’s is above 70%.
Intel now reports its earnings by divisions — an arrangement that exposes its manufacturing operations to greater scrutiny. The so-called foundry unit is seeking outside customers to help provide enough work for its growing footprint. For now, Intel’s designers are its only sizable customers.
Intel Foundry Services sales fell 13% from the prior-year quarter to $4.5 billion, in line with estimates. PC chip sales were $8 billion, versus an estimate of $7.9 billion. Intel’s data center and AI chip unit had sales of $3.4 billion, down 3% from a year earlier.
(Updates with CFO comment in the sixth paragraph)
