In its first earnings report since the departure of former CEO Pat Gelsinger, Intel (INTC, Financial) exceeded analysts' modest expectations for the fourth quarter of 2024. However, the company's struggles are evident. Except for its Network & Edge unit, which saw a 10% year-over-year growth, all other segments experienced revenue declines. This suggests that Intel's competitive position remains weak against rivals like Advanced Micro Devices (AMD, Financial) and NVIDIA (NVDA, Financial).
Intel's revenue beat comes with a caveat. Co-CEO David Zinsner noted that some Q4 revenue in the Client Computing Group (CCG) was due to customers buying ahead of potential tariffs. This demand shift, combined with PC inventory adjustments and competitive pressures, led Intel to issue lower EPS and revenue guidance for Q1.
Co-CEO Michelle Johnston Holthaus candidly stated there are "no quick fixes" for Intel's current position in the AI data center market. She provided a realistic outlook on Intel's situation and outlined necessary steps for improvement.
Strengthening the product roadmap and regaining customer trust is crucial for Intel's turnaround. While their PC and laptop processors (i7, Core i9) are competitive with AMD and Qualcomm (QCOM, Financial), their data center products lag. In Q4, Data Center and AI (DCAI) revenue dropped 3% year-over-year to $3.4 billion, following a 9% growth last quarter. Holthaus emphasized improving Xeon's competitive position by 2025.
Intel plans to launch Clearwater Forest, its first 18A server product, in the first half of 2025. This new process technology aims to introduce new CPUs for PCs and data centers. However, Intel's participation in the cloud-based AI data center market remains limited.
CCG revenue decreased 9% year-over-year to $8.0 billion, after a 7% decline last quarter. Positively, PC inventory digestion was slower in Q4 compared to Q3. Intel is set to launch Panther Lake, its next-generation desktop processor using the 18A process node, in the second half of 2025, with significant volumes expected in 2026.
The Foundry segment continues to incur losses, totaling $13 billion in 2024. Intel remains the largest customer of this segment, which is expected to transform into a major opportunity, driven by AI growth and the need for manufacturing sources outside of Taiwan Semiconductor (TSM, Financial).
Overall, Q4 was challenging for Intel, and the upcoming quarters may not show significant improvement given the company's current challenges. However, upcoming product launches and a new CEO could help refocus and rejuvenate the company.