In the previous quarter's earnings postscript I mentioned:
Intel Q4 Earnings:
Q4 revenue was $15.406B, up 10% year over year, the first year-over-year increase in seven quarters, and up 9% sequentially, though next quarter will decline 18% sequentially; full-year 2023 revenue was $54.228B, down 14% year over year, the second consecutive year of double-digit declines.
Q4 GAAP gross margin was 45.7%, up 6.5 percentage points year over year and 3.2 percentage points sequentially, but next quarter will decline 5 percentage points sequentially.
Q4 GAAP operating income was $2.585B, ending six consecutive quarters of operating losses, but next quarter will return to a loss.
Q4 GAAP net income was $2.66B, swinging to a profit year over year and up 758% sequentially, the third consecutive quarter of profitability, but next quarter GAAP will return to a loss; full-year 2023 GAAP net income was $1.675B, down 79% year over year, the fifth consecutive year of declines.
Q4 non-GAAP net income was $2.303B, up 485% year over year and 32% sequentially, but next quarter will decline 76% sequentially; full-year 2023 non-GAAP net income was $4.42B, down 42% year over year, the fifth consecutive year of declines (no non-GAAP distinction prior to 2021).
Q4 free cash flow was -$1.305B; full-year 2023 cumulative free cash flow was -$3.1B.
Q4 Business Details:
CCG revenue was $8.844B, up 34% year over year, ending nine consecutive quarters of year-over-year declines, and up 12% sequentially, the third consecutive quarter of 10%+ sequential growth, accounting for 57% of revenue, a new high since 2016; operating income was $2.888B, up 332% year over year and 39% sequentially, representing 112% of Intel's total operating income.
PC commercial and gaming segments continued strong growth; performance notebook shipments hit a record; 2023 PC TAM was around 270M units; benefiting from Win10 end-of-life, expects 2024 units up low single digits year over year; 40M AI PC units to ship.
Intel 4 process Meteor Lake Core Ultra began high-volume shipments; Intel 20A process Arrow Lake manufacture ready in 2024; Intel 18A process Panther Lake in 2025 on track.
DCAI revenue was $3.985B, down 7% year over year, the seventh consecutive quarter of year-over-year declines, and up 5% sequentially; operating income was $78M, profitable for the second consecutive quarter.
Server CPU revenue grew double digits sequentially; Xeon ASP held at historical highs, but market share was flat with Q3.
Sapphire Rapids shipments exceeded 2.5M; nearly 1/3 of demand driven by AI; Emerald Rapids already shipping to Alibaba.
PSG (FPGA), still within DCAI, saw revenue continue to decline sequentially; FPGA industry inventory levels remain elevated, weak demand persisting through H1 2024; starting next quarter PSG (FPGA) will be separated out, with a future IPO planned.
Gaudi 3 to launch this year; Falcon Shores in 2025 on track; Gaudi portfolio pipeline for 2024 up double digits sequentially, exceeding $2B; expects Q1 Data Center revenue down double digits sequentially; the AMD-Intel Data Center revenue gap will narrow further, with AMD having a chance to surpass Intel in 2024.
NEX revenue was $1.471B, down 29% year over year, the seventh consecutive quarter of year-over-year declines, and up 1% sequentially; operating loss of $12M; edge and networking markets recovering, telecom market remains weak; edge inference software layer OpenVINO adoption up 60% sequentially; expects 2024 NEX business to grow quarter by quarter, with H2 revenue exceeding H1.
IFS revenue was $291M, down 9% year over year and 6% sequentially; operating loss of $113M, the eighth consecutive quarter of losses.
Traditional packaging business up 63% year over year; this quarter won Department of Defense and government orders; partnering with UMC on 12nm targeting mobile, communications, and networking markets, similar to the Tower 65nm partnership announced last quarter; to date over 75 customers have test chips taped out, over 50 test chips to tape out in 2024-2025, 75% on 18A process.
Advanced packaging currently has 5 customers, expected to contribute revenue in 2025; lifetime deal value exceeds $10B, doubled year over year; first Foundry Day on February 21; expects Q1 IFS revenue to decline sharply due to divestiture of IMS business.
Mobileye revenue was $637M, up 13% year over year and 20% sequentially; operating income was $242M, up 15% year over year and 42% sequentially; revenue scale may again be surpassed by Qualcomm; next quarter revenue expected to decline 50% year over year with operating loss potentially exceeding revenue, marking Mobileye's New Year blow-up; expects Mobileye 2024 full-year revenue down 6%-12%; design wins value $7B.
Call Highlights:
Guides Q1 revenue midpoint of $12.7B, up 8% year over year and down 18% sequentially, dragged down by Mobileye, PSG, and IFS businesses; server and edge products holding up; operating income to swing to a loss; GAAP net loss of $1.1B; management expects subsequent revenue and EPS to recover quarter by quarter.
Intel 3 manufacture ready in 2024Q4；Sierra Forest（E-cores clouds）/Granite Rapids（P-cores enterprise） 2024H1；Intel 20A Arrow Lake manufacture ready in 2024，Intel 18A manufacture ready in 2024H2；Clearwater Forest（GAA 18A E-cores server）/Panther Lake（18A client）in 2025 on track ；
Long-term targets of 60% gross margin and 40% operating margin unchanged.
IFS 2030 target to become the world's second-largest foundry; first High-NA EUV installed in Oregon Fab, targeting 18A and below.
Expects 2024 capex as a percentage of revenue in the mid-30s.
Expects 2024 net income up year over year, free cash flow breakeven.
Overall, Intel's report still relies on PC to save face; PC contributed 57% of Intel's revenue and 112% of its operating income; but the PC recovery is increasingly heading in a worrying direction: the rebound is merely inventory normalization, not a demand surge. Recent rumors of Win12 slipping to 2025 are also negative. As for AI PC, it is essentially Intel's own marketing construct.
Too many investors have been "deceived" by Pat's pie-in-the-sky promises over the years; Pat is increasingly resembling Manchester United's ten Hag. Intel's years-long diversification strategy has been shattered; PC share has returned to 2016 levels; Intel's Data Center revenue will likely be surpassed by AMD this year; yet Pat remains immersed in the IDM 2.0 fantasy.
Long-time Intel followers expected this earnings blow-up, but did not anticipate it would drag down sentiment across the entire semiconductor sector, though that also relates to the recent run-up. Now the concern is AMD's report—not because of AMD's own fundamentals, but whether market expectations have become too high.