Intel has just released its latest quarterly figures, and as expected, they posted solid results with easy beats across the board. However, the issue lies with the guidance for Q1. Typically, Q1 is a seasonally weak quarter, but the outlook this time was a miss across the board. There are some positives, but also some negatives, and I’d say there are more answers than questions this time around—though there’s still no new CEO announcements or significant updates as of the time this video was made. The stock is currently up 3.32% after hours, and the implied volatility suggests a potential 10% move, so we’ll see what happens tomorrow.
Earning Overview
As for the Q1 outlook, it was a miss across the board, as expected, with seasonal weakness. Regarding margins, Intel acknowledged that their overall gross margins will be under pressure this year due to Lunar Lake, but Panther Lake is expected to have a better cost structure. Improvements in Intel Foundry should also help boost the overall margin profile for the business. Their full focus for 2025 is on 18A.
The Q1 revenue guidance is between $11.7 billion and $12.7 billion, with a gross margin forecast of 36% and flat EPS. They also mentioned that 7 out of 10 PCs (or maybe IPCs) are powered by Intel, which is a notable statistic. Despite the stock being down over 50% year-over-year, Intel remains an incredibly important and significant company.
Fundamental Analysis
Now, let’s look at a couple of comments from Intel’s co-CEOs. They highlighted that Q4 was a positive step forward, with revenue, gross margin, and EPS surpassing guidance. They also emphasized a renewed focus on simplifying and strengthening their product portfolio, along with progress on their process roadmap, which positions them to better meet customer needs. This is in line with what we've heard from MJ at CES, focusing on products and customers.
Intel’s CFO and co-COO discussed the cost reduction plan announced last year, noting that it’s already impacting the company. They’re fostering a culture of efficiency across the business and aiming for higher returns on invested capital and improved profitability. The Q1 outlook reflects seasonal weakness, compounded by macro uncertainties, inventory digestion, and competitive dynamics. However, Intel is staying focused on execution to drive progress and unlock value.
For the quarter, Intel’s revenue came in at $14.3 billion, down 7% year-over-year but $500 million higher than the October outlook. Gross margin exceeded expectations, coming in at 42.1%, 2.6 percentage points above forecast, and EPS was 13 cents, 1 cent higher than expected. However, Q1 guidance showed a revenue miss of 5%, a concerning drop in gross margin to 36% (a 330-basis point miss), and flat EPS expectations. The free cash flow missed expectations by a significant margin, though that’s not a major concern just yet.
Guidance
Looking at Intel's product segments, there’s the consumer side, the DCAI (Data Center and AI), and NEX. Starting with the consumer side, it’s a very solid business in my opinion—though it could certainly be better, it’s still performing well. With $8 billion in revenue and an operating margin of 38.1%, Intel reported operating income of $3.1 billion. Of course, Q4 is typically a strong quarter for Intel, which is good news not just for them but also for AMD. Additionally, they mentioned that they’re on track to ship over 100 million cumulative ICs by the end of 2025.
Now, turning to the data center side (DCAI), there’s a slight quarter-over-quarter increase with $3.4 billion in revenue. However, the operating margin is down quite a bit, now at just 6.9%. MJ shared some updates on the data center side, expressing dissatisfaction with current performance but noting they are learning from these challenges. They also confirmed that Falcon Shores, a project they had been working on, will now be an internal chip only. The lessons learned from Falcon Shores will be applied to Jaguar Shores, which will be a full rack-scale solution that they believe will be highly competitive and more aligned with customer needs. So, you can essentially remove Falcon Shores from the roadmap—its focus has shifted to Jaguar Shores.
In addition, Intel confirmed that Panther Lake is still on track for production in the second half of 2025, with a volume ramp expected in 2026. Nova Lake is also set to launch, and they clarified that the D (presumably referring to the design or development process) will be done both internally and externally. Intel mentioned that future data center products could potentially be manufactured by external foundries if it makes sense. This is interesting because, in a recent livestream with Jose, we discussed this very point. Personally, it doesn’t bother me if Intel uses TSMC for some products. If it means they can deliver competitive products with the best technology and take market share, then I’m all for it. While it would be ideal for all products to be made internally, if using TSMC helps Intel produce the best products, then it’s a smart move.
As for Intel Foundry, they’re seeing significant improvements in operating losses compared to previous quarters. They’ve confirmed that volume production is still on track for the second half of the year, with financial improvements expected in 2025 as EUV (extreme ultraviolet) technology ramps up. They anticipate improving the margin mix for Intel Foundry throughout the year and still expect to break even by 2027. Interestingly, I believe they mentioned they are actively looking for strategic partnerships for Intel Foundry, though I’ll need to double-check that from the transcript. It’s something to keep an eye on.
Lastly, regarding Intel’s server products, the launch for their Clearwater offering is still planned for the first half of 2026.
Free Cash Flow
Intel's free cash flow for Q4 2024 came in at $1.7 billion. This was notably lower than expected, and the company missed its free cash flow target by a significant margin. However, as mentioned in the earnings call, free cash flow wasn’t the main focus at this time, with more attention being paid to other aspects of their financials and product development.
Market Sentiment
Overall, we've discussed Intel’s Foundry plans and potential spin-offs, and while some have speculated about Intel selling off its Foundry, I don’t think that will happen. Instead, they seem focused on seeking partnerships and ensuring they build a world-class Foundry business, which I really liked hearing during the earnings call.
Looking ahead, we’re likely to see Intel fully exit its stake in Altera by next quarter, and they’ll probably sell most of their stake in Mobileye in the coming quarters as well. But for now, it seems Altera will be completely gone by the next earnings report, which was the takeaway from the call.
They also touched on the political side of things, mentioning that they’re planning to meet with the new administration to discuss how they can continue to lead and grow in the United States. While Intel never truly left the U.S., they want to stay powerful and may even be positioned for a comeback.
Conclusion
Overall, I wasn’t too surprised by this quarter’s results, although I did expect a bit more from the guidance. There are still some unanswered questions, notably around the CEO search. Some people might be surprised that there’s still no new CEO, but keep in mind that Pat Gelsinger’s departure came unexpectedly. I’d prefer they take their time finding the right person for the role—Intel’s potential comeback could be massive. Just look at IBM, which was once considered on its last legs but has shown remarkable recovery in recent years.
Intel’s comeback is certainly possible, especially with their focus on EUV and new machines from ASML. With the Foundry business now separated from Intel’s product side, it has its own P&L, so they’ll need to stay focused on cost and profitability. The key for Intel now is execution—creating the right products for the right customers at the right margins.
One thing that wasn’t mentioned during the call was Intel’s GPU business, which I found surprising. No one asked about it, and without any comments, it might just be too small to mention for now.
As for me, I’m holding my position and likely to add more shares in the coming days. I didn’t buy under $20 before the earnings report because I was waiting for more information, but now that we have some clarity, I’m comfortable increasing my stake.
That’s about it for now—next week should be interesting to hear what AMD has to say.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub
Comments