Intel reported their results on Thursday and it was not good. They suffered their largest quarterly loss in the company's history. At the same time, analysts are more optimistic about the company because they believe Intel has reached such a low point that the company can only go up from here.
Link to Intel's 1st Quarter Financial Report (10-Q) below:
To understand some of the terms being used in this post, please read
my previous posts about the Income Statement, Balance Sheet, and Cash Flow Statements.
Intel's 1st Quarter 2023 Income Statement
Balance Sheet
Cash Flow Statement
When compared to the 1st quarter of 2022, Intel's revenue declined by 36% this quarter. This decline was not surprising to investors because the entire semiconductor industry, especially the PC segment, is in a downturn.
Over the last few quarters, computer sellers did not order as many computers because they had too much inventory. Analysts believe customers are close to depleting their excess inventory and will begin ordering more computers soon. It is also expected for Intel's revenue to increase in the 2nd half of this year because back to school and the holiday shopping season will begin.
The state of the PC market (Client Computing Segment) is critical to Intel's success because it represents 49% of their revenue. The Data Center and Artificial Intelligence segment is their second most important source of revenue. The CEO, Pat Gelsinger, believes the Data Center and AI market will take a few more quarters to rebound. The only segment that improved this quarter was Mobileye.
Mobileye's stock price declined ~16% this week after they announced their revenue and profits being lower than expected this year. They mentioned the Chinese electric vehicle market being in a downturn because one of their top customers, Tesla, is cutting prices, government subsidies are waning, and the Chinese economy is still weak. Although Mobileye's price declined this week, it is still 79% higher than when it first started trading on the stock market in October 2022.
What I liked about this quarter's report is Intel did not reduce their Research and Development (R&D) spending by much. Although their sales declined by 36%, their R&D only declined by ~6%. Intel also invested $7.4B on their Property, Plant & Equipment this quarter, which was 61% more than in 2022. In order for Intel to accomplish their 5 nodes in 4 years strategy and regain their leadership position in the semiconductor industry, they need to keep investing. They need to show customers and investors their ability to produce superior products on time. Based on their earnings call, they are on track to accomplishing this goal.
Intel's cash balance was relatively stable. It went from $28.3B in December 2022, to $27.5B on April 1, 2023. A ~3% decline.
What I did not like was their debt increased by ~19.6%. Since more debt equals more risk, I hope they find more investment partners to share the cost of their construction projects, and more government subsidies so they don't feel pressured to borrow more money.
CONCLUSION
It appears Intel is turning things around and analysts are starting to understand the company's vision.
Analyst Community Changing Their Tune On Intel
Video by CNBC
Next week, God willing, I will review Intel's Earnings Call so we can get a better understanding of the company's strategy moving forward.
Stay blessed.
“Commit your way to the Lord; trust in him, and he will act.”
Psalm 37:5 ESV
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