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    INTC
    Earnings call· Dec 2024(Q4 FY24)

    INTEL CORP INTC

    Jan 30, 2025 Source

    Executive summary

    Intel Q4 FY24 — Strong Close to Challenging Year, Foundry Path to Breakeven

    Intel closed a challenging 2024 with Q4 results exceeding guidance, driven by Intel Products execution and initial CHIPS grant receipts. Under interim co-CEOs, the company is prioritizing focused investments and efficiency, aiming to rebuild credibility through consistent execution. While Intel Products faces margin pressure from product mix, Intel Foundry is focused on improving profitability and achieving breakeven by 2027, leveraging 18A ramp and external partnerships. The company is navigating macro uncertainties and competitive pressures, particularly in the AI data center market, by refining its roadmap and capital deployment strategy.

    Highlights

    5

    • Q4 revenue, gross margin, and EPS exceeded guidance, with non-GAAP gross margin at 42.1% (260 bps above guide) and non-GAAP EPS at $0.13 (vs. $0.12 guide).

    • Intel Products revenue grew 7% sequentially to $13 billion, driven by CCG (up 9% QoQ) and NEX (up 7.5% QoQ).

    • Intel Foundry drove incremental operating efficiencies and achieved key grant-related milestones, with EUV wafer revenue growing from 1% in 2023 to over 5% in 2024.

    • Secured up to $7.86 billion in CHIPS grants, with $1.1 billion received in Q4 FY24 and an additional $1.1 billion in Q1 FY25.

    • On track to ship more than 100 million cumulative AI PC systems by the end of 2025.

    Concerns

    5

    • Intel Foundry reported a negative gross margin and a greater than $13 billion operating loss in 2024.

    • Q1 FY25 revenue guidance of $11.7 billion to $12.7 billion (midpoint $12.2 billion) represents an 11% to 18% sequential decline due to macro uncertainty, PC inventory, competition, and tariff pull-forward.

    • Intel Products gross margin is expected to decline in 2025 due to product mix, particularly Lunar Lake's higher cost structure.

    • Accrual of approximately $750 million in Q4 related to a SCIP agreement, reflecting an adjustment in planned capacity ramp in Ireland.

    • Not yet participating meaningfully in the cloud-based AI data center market, leading to tempered expectations for Falcon Shores, now an internal test chip.

    Guidance & targets

    18
    CategoryTargetConfidence
    Q1 FY25 Revenue
    $11.7B to $12.7B
    high materiality
    High
    Q1 FY25 Non-GAAP Gross Margin
    approximately 36%
    high materiality
    High
    Q1 FY25 Tax Rate
    12%
    medium materiality
    High
    Q1 FY25 Non-GAAP EPS
    Breakeven
    high materiality
    High
    Full-year 2025 OpEx
    $17.5B
    high materiality
    High
    Full-year 2025 Growth Capital Investments (CapEx)
    approximately $20B
    high materiality
    High
    Full-year 2025 Net CapEx
    $8B to $11B
    high materiality
    High
    Full-year 2025 Noncontrolled Income (GAAP basis)
    $500M to $700M
    medium materiality
    High
    Full-year 2026 Noncontrolled Income (GAAP basis)
    $1.2B to $1.4B
    medium materiality
    High
    Intel Foundry Operating Income
    Breakeven
    high materiality
    High
    AI PC Systems Shipments
    more than 100 million cumulative systems
    medium materiality
    High
    Panther Lake Launch
    launch in the second half of 2025
    high materiality
    High
    Clearwater Forest Launch
    launch in the first half of next year
    medium materiality
    High
    Altera IPO
    IPO in the coming years
    medium materiality
    Medium
    Consolidated Gross Margin
    improve from Q1
    high materiality
    High
    Intel Products Gross Margin
    decline this year
    high materiality
    High
    Intel Foundry Gross Margin
    improve
    high materiality
    High
    2026 OpEx
    further reductions
    medium materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Intel Products
    Operating profit up $300 million quarter-over-quarter on higher revenue and reduced operating expenses.
    		$13B—7%$3.6B operating profit (28% of revenue)
    Client Computing Group (CCG)
    Revenue up quarter-over-quarter as customer inventory digestion slowed meaningfully. A portion of Q4 revenue upside suspected to be due to customers hedging against potential tariffs.
    		——9%—
    Data Center and AI (DCAI)
    Revenue up sequentially off a better-than-expected Q3, with demand for traditional servers remaining stable.
    		——slightly—
    Network and Edge (NEX)
    Revenue up sequentially and more than 20% from Q2 lows, as customers return to more normal buying patterns, especially in the edge business.
    		——7.5%—
    Intel Foundry
    Revenue up sequentially on increased EUV wafer mix and higher equipment sales by IMS. Operating loss improved meaningfully sequentially as Q3 was impacted by $3.1 billion of impairments. Excluding impairments, operating loss would have been roughly flat quarter-on-quarter.
    EUV wafer revenue: >5% of total revenue in 2024 (vs 1% in 2023)
    		$4.5B—3%-$2.3B operating loss
    Mobileye
    Guided for full year 2025 increases to both revenue and operating income.
    		$490M—1%$103M operating profit
    Altera
    Operating margin improved versus 2% in Q3 on better gross margins and operating leverage. Q1 revenue expected to be down sequentially.
    		$429M—4%21% operating margin

    Operational metrics

    18
    Non-GAAP Gross Margin
    42.1%260 bps ahead of guidance
    Q4 FY24

    On higher revenue, better costs, and receipt of first CHIPS grant, partially offset by inventory reserves related to Gaudi.

    Non-GAAP EPS
    $0.13vs guidance of $0.12
    Q4 FY24

    Higher revenue, stronger gross margin, and improved operating leverage offset by lower interest and other income, which included a $750M accrual related to a SCIP agreement.

    Gross CapEx
    $6.3B
    Q4 FY24

    With offsets of $1.6 billion in the quarter.

    Cash and short-term investments
    $22.1B
    end of FY24

    Balance at the end of the year.

    Full-year Revenue
    $53.1Bdown 2.1% YoY
    FY24

    Modest year-over-year growth in Intel Products offset by lower revenue at Mobileye, Altera, and forecasted decline in foundry services.

    Full-year Gross Margin
    36%down 760 bps
    FY24

    Due to Q3 impairments, lower revenue, and inventory impacts.

    Full-year EPS
    -$0.13down $1.18
    FY24

    On lower revenue, lower gross margin, and higher period charges.

    Full-year Gross Capital Investments
    $24B
    FY24

    Made during the year.

    Full-year Capital Offsets
    $13.4B
    FY24

    From SCIP partner contributions and government grants and incentives.

    SCIP Agreement Accrual
    ~$750M
    Q4 FY24

    Reflecting an adjustment in planned capacity ramp in Ireland, impacting interest and other income.

    CHIPS Grant Received
    $1.1B
    Q4 FY24

    First portion of the CHIPS grants received.

    CHIPS Grant Received
    $1.1B
    Q1 FY25

    Additional portion of the CHIPS grants received in January.

    Intel Products Gross Margin
    51%
    FY24

    Historical gross margin for Intel Products.

    Depreciation Growth
    ~10%
    2025

    Expected depreciation growth for Intel Foundry.

    Noncontrolled Income (NCI) to net
    ~0
    Q1 FY25

    Expected impact on a GAAP basis.

    Gross Margin Fall-through
    40-60%
    2025

    Expected range for 2025, impacted by Lunar Lake margin pressure.

    Gross Margin Fall-through
    60%+
    2026

    Expected range for 2026, with more 18A volume.

    External Manufacturing
    30%
    today

    Percentage of total manufacturing done externally across various partners.

    Industry KPIs

    8
    MetricValueDetails
    Ai data center revenueNot participating meaningfully
    Fab capacity utilizationBetter utilization
    Bookings net order intakeHealthy RFQ pipeline
    Design wins socket pipelinePanther Lake (Intel 18A); Clearwater Forest (Intel 18A server product)
    Inventory channel inventoryPC inventory continued to normalize
    Node platform ramp schedulePanther Lake (Intel 18A); Clearwater Forest (Intel 18A); Nova Lake
    Wafer shipments foundry ASPEUV wafer mix grew from 1% to >5%; 18A wafer price goes up 3x cost% / x
    End market segment revenue mixIntel Products: $13B; CCG: up 9% QoQ; DCAI: up slightly QoQ; NEX: up 7.5% QoQ; Intel Foundry: $4.5B; Mobileye: $490M; Altera: $429MUSD / %

    Product announcements

    5
    ProductTypeDetails
    Enterprise AI CPUs with Intel vProlaunch
    Panther Lakelaunch
    Nova Lakelaunch
    Clearwater Forestlaunch
    Falcon Shoresdiscontinuation

    Deals & partnerships

    5
    U.S. Department of CommerceCHIPS Act grantsup to $7.86B

    Signed a definitive agreement awarding Intel up to $7.86 billion in grants, which are milestone-based. $1.1 billion was received in Q4 and another $1.1 billion in Q1.

    Department of DefenseBuilding Secure Enclave

    Continuing to make good progress building out the Secure Enclave in partnership with the Department of Defense, supporting efforts to strengthen U.S. technology and manufacturing leadership.

    Tower Semiconductor and UMCCollaboration in advanced packaging

    Continuing to have good momentum in advanced packaging and in collaboration with Tower Semiconductor and UMC, critical for utilizing assets longer for higher rates of return.

    Strategic and financial partnersExploring additional funding options for Intel Foundry

    Intention to establish an independent subsidiary structure for Intel Foundry enables seeking additional funding options from both strategic and financial partners, which is now actively being explored.

    AlteraStake sale

    Making good progress on the stake sale of Altera, with a path for an IPO in the coming years, which will help generate cash for de-leveraging.

    Capital programs

    1
    Capacity Adjustments (Ohio and Ireland)underway

    Benefit: Better utilization of construction in progress

    Reflecting further capacity adjustments to Ohio and Ireland as well as better utilization of construction in progress, leading to a lower 2025 CapEx guide.

    Risks & headwinds

    10
    Macro uncertaintyQ1 FY25

    Q1 FY25 revenue down 11-18% sequentially

    Mitigation: Cautious outlook, focus on efficiency and cost reductions.

    PC inventory balancingQ1 FY25

    Q1 FY25 revenue down 11-18% sequentially

    Mitigation: Acknowledged slowing digestion rate in Q4, but still a factor for Q1.

    Increasing competitionQ1 FY25 and beyond

    Q1 FY25 revenue down 11-18% sequentially

    Mitigation: Aggressive strategy to win market share in CCG and DCAI, fighting for every socket.

    Potential tariffsQ1 FY25

    Portion of Q4 revenue upside due to hedging, creating Q1 headwind

    Mitigation: Acknowledged customer hedging, but impact beyond Q1 is uncertain.

    Lower interest and other incomeQ4 FY24

    Offset Q4 EPS upside

    Mitigation: Includes accrual related to SCIP agreement.

    SCIP agreement accrualQ4 FY24

    ~$750M

    Mitigation: Reflects adjustment in planned capacity ramp in Ireland.

    Intel Products gross margin declineFY25

    Expected decline in 2025 from 51% in 2024

    Mitigation: Due to product mix in CCG and DCAI, particularly higher cost of Lunar Lake. Expected to improve with Panther Lake in 2026.

    Intel Foundry operating lossFY24

    Greater than $13B operating loss in 2024

    Mitigation: Systematically attacking costs, aiming for breakeven operating income by end of 2027.

    Lack of meaningful participation in cloud-based AI data center marketCurrent

    Tempered expectations for Falcon Shores

    Mitigation: Simplifying roadmap, focusing resources on system-level solutions like Jaguar Shores, leveraging core assets.

    Noncontrolled Income (NCI) growthFY26 and beyond

    Expected to grow to $1.2B-$1.4B in FY26 (GAAP basis)

    Mitigation: Exacerbated by selling down stakes in companies like Mobileye and Altera, and increasing wafer-outs at fabs with SCIP partners.

    What to watch in Q1 FY25

    5

    Intel Foundry Operating Income Improvement

    this year (FY25)
    CurrentOperating loss of $2.3B in Q4 FY24
    TargetDemonstrate improvements

    Why it matters

    Intel Foundry's path to profitability is a key strategic goal, with a target of breakeven by end of 2027.

    We're going to systematically attack our costs and remain highly focused on our goal of delivering breakeven operating income for Intel Foundry by the end of 2027, and we expect to demonstrate improvements this year.

    Q&A highlights

    8

    How much is Granite Rapids closing the competitive gap in DCAI, what's the update on Clearwater Forest, and when will the gap visibly close?

    Michelle stated that Granite Rapids is a good first step in closing the gap, but it's a 1-2 year journey of consistent execution. Clearwater Forest, an E-core product on Intel 18A, is expected in H1 2026 due to complex packaging, targeting a niche market.

    “Granite Rapids is a good first step in doing that. It does close the gap. Our customers are excited about it, and we are starting to see the competitiveness of that product materialize in volume. But I'm also very clear-eyed about where we stand.”

    asked by Ross Seymore · answered by Michelle C. Holthaus

    2 min read6 chapters

    Detailed Narrative

    01

    Interim Co-CEO Leadership and Strategic Focus

    Michelle Holthaus and Dave Zinsner, as interim co-CEOs, are driving a strategy focused on improved execution, disciplined investments, and business simplification. They emphasize a commitment to delivering tangible results and rebuilding credibility, prioritizing areas for differentiated value and listening closely to customer needs. This approach aims to ensure Intel's long-term success by fostering a leaner, more efficient company.

    02

    Intel Products: Client, Data Center, and AI Strategy

    Michelle Holthaus outlined a three-pronged strategy for Intel Products: client edge, traditional data center, and AI data center. In client, Intel aims to fortify its leadership in AI PCs, with Core Ultra's success and upcoming Panther Lake (Intel 18A) and Nova Lake products. For traditional data centers, the focus is on improving Xeon's competitive position with Granite Rapids and Clearwater Forest, leveraging the x86 ecosystem. In AI data centers, the company is re-evaluating its approach, tempering expectations for Falcon Shores to focus on system-level solutions with Jaguar Shores, and leveraging its diverse IP to address customer needs for lower cost and increased compute efficiency.

    03

    Intel Foundry: Path to Profitability and External Engagement

    Dave Zinsner highlighted Intel Foundry's progress on Intel 18A execution and its goal to achieve breakeven operating income by the end of 2027, from a greater than $13 billion operating loss in 2024. The strategy involves systematically attacking costs, improving efficiency, and leveraging EUV wafer mix. While primarily driven by internal wafers, Intel Foundry is actively engaging external customers, with a healthy RFQ pipeline, and collaborating with partners like Tower Semiconductor and UMC for advanced packaging.

    04

    CHIPS Act Grants and US Manufacturing Leadership

    Intel has signed a definitive agreement with the U.S. Department of Commerce, securing up to $7.86 billion in CHIPS grants. The company received $1.1 billion in Q4 FY24 and another $1.1 billion in Q1 FY25. Intel continues to build its Secure Enclave in partnership with the Department of Defense, reinforcing its commitment to strengthening U.S. technology and manufacturing leadership and aligning with government interests in domestic semiconductor production.

    05

    Capital Allocation and Financial Discipline

    Intel is prioritizing de-leveraging in 2025 through lower CapEx, increased cash from operations, and monetizing non-core assets. The 2025 growth capital investments are guided at approximately $20 billion, at the low end of previous estimates, by better utilizing existing assets under construction and adjusting capacity plans for Ohio and Ireland. Net CapEx for 2025 is projected at $8 billion to $11 billion, with significant offsets from government incentives and partner contributions.

    06

    Segment Reporting Changes

    Intel announced upcoming changes to its segment reporting, effective with Q1 earnings. These changes include moving the edge portion of NEX and the auto business from All Other into CCG, moving the networking portion of NEX (including Xeon sales) into DCAI, and moving the IMS equipment business out of Intel Foundry into All Other. These adjustments aim to provide clearer governance and operational separation, supporting the independent subsidiary structure for Intel Foundry.

    AI-generated summary of the company’s earnings call. Not investment advice.