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Computer processor maker Intel (NASDAQ:INTC) missed analysts' expectations in Q2 CY2024, with revenue flat year on year at $12.83 billion. Next quarter's revenue guidance of $13 billion also underwhelmed, coming in 9.7% below analysts' estimates. It made a non-GAAP loss of $0.03 per share, down from its profit of $0.13 per share in the same quarter last year.
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Intel (INTC) Q2 CY2024 Highlights:
- Revenue: $12.83 billion vs analyst estimates of $12.98 billion (1.1% miss)
- EPS (non-GAAP): -$0.03 vs analyst estimates of $0.10 (-$0.13 miss)
- Revenue Guidance for Q3 CY2024 is $13 billion at the midpoint, below analyst estimates of $14.39 billion
- Plans to cut 15% of headcount, which was over 125,000 at the end of the second quarter
- Will not pay a dividend in Q4
- Gross Margin (GAAP): 35.4%, down from 35.8% in the same quarter last year
- Inventory Days Outstanding: 123, down from 139 in the previous quarter
- Free Cash Flow of $8.16 billion is up from -$6.18 billion in the previous quarter
- Market Capitalization: $130.9 billion
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 ChipsThe 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 GrowthIntel's revenue has been declining over the last three years, dropping by 9.6% on average per year. This quarter, its revenue declined from $12.95 billion in the same quarter last year to $12.83 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 had a difficult quarter as revenue dropped 0.9% year on year, missing analysts' estimates by 1.1%.
Intel's revenue inverted from positive to negative growth this quarter, which was unfortunate to see. Looking ahead to the next quarter, the company's management team forecasts a 8.2% year-on-year revenue decline. On the other hand, analysts expect revenue to turn positive over the next 12 months, with average estimates of 8.8% growth.
Product Demand & Outstanding InventoryDays 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.
This quarter, Intel's DIO came in at 123, which is 10 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from Intel's Q2 Results We were impressed by Intel's strong improvement in inventory levels. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its revenue missed Wall Street's estimates. The company plans to cut 15% of headcount, which was over 125,000 at the end of the second quarter. Overall, this quarter could have been better. The stock traded down 11.5% to $25.78 immediately following the results.
