4Q23 Triumph Drowned Out by 1Q24 Forecast Blues
- Intel 4Q23 delivers a clean beat to consensus estimates
- Subdued guidance alludes to a slower than expected comeback
- We maintain HOLD with TP US$45.30 as capacity expansion of Intel Foundry Services could be a headwind against the pace of margin expansion
Intel 4Q23 delivers a clean beat to consensus estimates. Revenue of $15.4b (+10% yoy) came in above the street’s forecast of $15.2b. The CCG (client computing group) segment which accounts for more than half of Intel’s revenue, was up 33% yoy on a greater alignment in sell in and sell through rates. DCAI (data centre and AI), accounting for c.30% of the business, was down 10% yoy owing to a contraction in CPU TAM (total addressable market) and continued competitive pressures. Non GAAP EPS of $0.54 (+260% yoy) also surpassed analysts’ estimates of $0.45, led by a recovery in gross margins of 5 ppts and OpEx discipline.
Subdued guidance alludes to a slower than expected comeback. Guidance was lacklustre on both fronts with revenue guidance of $12.2-13.2b below estimates of $14.2b and EPS guidance of $0.13 below the $0.33 expected by consensus. The PC market continues to show promise with low single digit TAM growth in 2024 while the outlook for data centre looks relatively bleak. Ongoing competitive pressures and a shift in wallet share from CPU to accelerators are likely key factors behind the double-digit percent sequential decline in Q1 data centre revenue expected by Intel. Despite the rough start, CPU growth should normalize through 2024. Intel remains on track in executing its 5N4Y strategy but capacity expansion as it grows its foundry business could be a headwind against the pace of margin expansion. HOLD TP US$45.30.