Intel Corporation (NASDAQ: INTC) experienced a significant decline in its stock price, dropping over 10% in premarket trade on Friday. This drop followed the chipmaker’s fourth-quarter earnings report, which exceeded expectations in some areas but fell short in others. While the adjusted earnings per share (EPS) of $0.54 beat the estimated $0.45, and adjusted revenues of $15.406 billion exceeded the $15.170 billion estimate, the outlook for the current quarter was disappointing.
Investors were hoping for some relief after a series of earnings disappointments, and initially, Intel seemed to be delivering. The company had previously exceeded conservative earnings estimates and provided an optimistic outlook for the future, leading to a doubling in its stock value over the past year. However, despite these positive signs, Intel is still far from its previous success when it generated quarterly sales of over $20 billion.
Breaking down the numbers, the PC chip business (Client Computing) reported sales of $8.84 billion, surpassing the estimated $8.42 billion. However, the data center and artificial intelligence revenue fell short of expectations, amounting to $4.0 billion instead of the projected $4.08 billion. Network & Edge sales also missed estimates at $1.47 billion, while Mobileye exceeded expectations at $637 million. Intel Foundry Services also fell short of estimates at $291 million.
Although the adjusted operating profit of $2.58 billion surpassed the estimated $2.1 billion, and the adjusted operating margin exceeded expectations at 16.7%, research and development (R&D) expenses slightly exceeded estimates at $3.99 billion.
Looking ahead, concerns arise from Intel’s continuing downward trend in key financials. The projected revenues for the upcoming quarter are in the range of $14.5 billion to $15.1 billion, with a gross margin of 44.5%. This gross margin estimate is lower than current expectations of 45.5%, resulting in an EPS of $0.45. This outlook indicates that Intel still has a long way to go in its recovery, as reflected by the market’s reaction to the earnings report.
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In conclusion, while Intel’s fourth-quarter earnings report surpassed expectations in some areas, the disappointing outlook for the current quarter caused the company’s stock to nosedive over 10%. Despite signs of progress, Intel still has a long road ahead before fully recovering its past levels of success. Investors are advised to consider the bearish trend and overvaluation highlighted by Investing Pro’s Fair Value analysis. However, with ProPicks, individuals can harness the power of AI to make more informed investment decisions and potentially achieve higher returns in the future.
