Intel Q1 2024 Results: New Reporting Structure with Top Bottom Beat

Intel Q1 2024 Results: New Reporting Structure with Top Bottom Beat

The News: Intel reported its first quarter (Q1) revenue of $12.7 billion, up 9% year-over-year (YoY). Read the Intel press release here.

Intel Q1 2024 Results: New Reporting Structure with Top Bottom Beat

Analyst Take: Intel introduced its new financial and operational reporting structure underpinned by Q1 2024 revenue in-line and beat on gross margin and earnings per share (EPS) non-GAAP. As a result, Intel expects full year revenue and EPS growth in 2024 with revenue growth accelerating in the second half. Additional key financial results include:

  • Revenue: $12.72 billion vs. $12.71 billion expected
  • Adjusted EPS: $0.18 vs. $0.13 expected
  • Second quarter (Q2) revenue forecast: $12.5 billion to $13.5 billion vs. $13.63 billion expected

Intel CEO Pat Gelsinger spotlighted that the company made steady progress measured against its priorities, producing a solid quarter. This especially included execution of its innovation strategy across the client, edge, and data center portfolios that drove double-digit revenue growth across the newly formed Intel Products business. With Intel 3 in high-volume production, leading-edge semiconductors are being manufactured in the US for the first time in almost a decade aligning with Intel’s objective to regain process leadership next year in accord with growing the Intel Foundry business.

As a result, Intel is expressing confidence in its plans to drive sequential growth throughout the year as the company speeds up pushing out AI solutions while maintaining organization-wide focus on execution, operational discipline, and shareholder value creation. This also reflects Intel’s track record as a strong second half performer.

We see that the Q1 2024 performance was better than expected but the drag after hours is attributable to the guide Intel provided in software across both revenue and EPS. Highlights for the quarter besides the beat on top and bottom was the strong 31% growth in the company’s client business.

Prior to reporting Q1 2024 results, Intel announced the implementation of an internal foundry operating model, which took effect in Q1 2024 and created a foundry relationship between its Intel Products business (collectively CCG, DCAI, and NEX) and its Intel Foundry business (including Foundry Technology Development, Foundry Manufacturing and Supply Chain, and Foundry Services – formerly IFS).

The foundry operating model is a key component of the company’s strategy and is designed to reshape operational dynamics and drive greater transparency, accountability, and focus on costs and efficiency. The company also previously announced its intent to operate Altera, an Intel Company (previously Intel’s Programmable Solutions Group), as a standalone business beginning in Q1 2024. Altera was previously included in DCAI’s segment results.

Intel revealed the foundry business had a $7 billion operating loss in 2023. Intel has already indicated it expects foundry unit losses to continue, peaking in 2024 with the expectation of achieving breakeven performance by 2027, providing substantial operating profit improvement, and ultimately attaining profit margin of 30% by 2030.

The split is warranted to convince and assure potential foundry customers that Intel Foundry will protect their intellectual property according to the same practice as the other semiconductor foundries. From our perspective, the whole foundry business Q1 2024 performance and the new segmentation should not come as a surprise to anyone.

Intel Business Unit Q1 2024 Breakout

Intel Q1 2024 Results: New Reporting Structure with Top Bottom Beat
Image Source: Intel

Intel’s Client Computing Group (CCG) reported Q1 2024 revenue of $7.5 billion, up 31% YoY due primarily in advancing its mission to bring AI everywhere. As of the end of Q1 2024, CCG reported more than 5 million AI PCs have shipped since the December 2023 launch of Intel Core Ultra processors, supported by more than 100 software vendors. Intel expects to exceed its prior forecast of 40 million AI PCs by the end of 2024.

The Data Center and AI (DCAI) business unit reported $3.0 billion, up 5% YoY aligned with the introduction of the Intel Gaudi 3 AI accelerator at Intel Vision. Intel is projecting Gaudi 3 to deliver on average 50% faster inference and 40% greater inference power efficiency than NVIDIA H1001 on leading generative AI (GenAI) models. Intel also announced new Intel Gaudi accelerator customers and partners, including NAVER, Dell Technologies, Bosch, Supermicro and many others. Additionally, the next-generation E-core Intel Xeon, code-named Sierra Forest, achieved product release in April 2024, and Intel expects Granite Rapids to be released in Q3 2024

The Network and Edge (NEX) business unit reported $1.4 billion, down 8% YoY. Intel introduced the new Intel Edge Platform, a modular, open software platform designed to enable enterprises to develop, deploy, and manage edge and AI applications at scale. The Intel Edge Platform has ecosystem support from Amazon Web Services, Lenovo, Red Hat, SAP, and Wipro. Intel also announced the Open Platform for Enterprise AI, which aims to accelerate secure, cost-effective GenAI deployments for businesses by driving interoperability across a diverse and heterogeneous ecosystem, starting with retrieval-augmented generation (RAG). Among the other business units, Mobileye reported $239 million, down 48% YoY, and Altera reported $342 million, down 58% YoY.

Intel Foundry: Looking Beyond the 5N4Y Process Roadmap

Intel Foundry reported $4.4 billion, down 10% YoY. At its inaugural Direct Connect event in February, Intel launched Intel Foundry supported by nearly 300 ecosystem partners in attendance. At Direct Connect, Intel Foundry announced an increased expected lifetime deal value for external customers of more than $15 billion. Plus, Intel continues to drive customer adoption of Intel 18A, with a major U.S. aerospace and defense customer committing to Intel 18A, bringing Intel Foundry’s external customer commitments on Intel 18A to six. In Q1 2024, Microsoft also announced its plans to design a chip on Intel 18A.

Intel unveiled its process technology roadmap beyond its five-nodes-in-four-years (5N4Y) process goal, adding Intel 14A to its leading-edge node lineup following Intel 18A and announcing several specialized node evolutions for Intel 3, Intel 18A and Intel 14A to enable customers to develop and deliver products tailored to their specific needs. Overall, Intel Foundry indicated a strong pipeline of nearly 50 customer test chips and has engagements with almost every foundry customer in the industry on advanced packaging, including five design awards.

Intel Unleashes Gaudi 3 Led Enterprise AI Strategy

At Intel Vision 2024, Intel unleashed a comprehensive AI strategy for enterprises, with open, scalable systems that are built to work across the full continuum of AI segments. Spearheading the new and refreshed Intel enterprise AI proposition is the launch of the Intel Gaudi 3 accelerator product. Intel emphasized that with only 10% of enterprises successfully moving GenAI projects into production last year, Intel’s latest offerings address the challenges businesses face in scaling AI initiatives.

The Intel Gaudi 3 AI accelerator is built to power AI systems with up to tens of thousands of accelerators connected through the common standard of Ethernet. Intel Gaudi 3 promises fourfold more AI compute for BF16 and a 1.5x increase in memory bandwidth over its predecessor. The accelerator can deliver sizable improvements in AI training and inference for global enterprises looking to deploy GenAI at scale.

Intel Gaudi 3 is designed to offer open, community-based software and industry-standard Ethernet networking. And it can allow enterprises to scale flexibly from a single node to clusters, super-clusters, and mega-clusters with thousands of nodes, supporting inference, fine-tuning, and training at the largest scale. Intel Gaudi 3 will be available to OEMs, such as Dell Technologies, Hewlett Packard Enterprise (HPE), Lenovo, and Supermicro, in Q2 2024.

To further boost its enterprise AI proposition, Intel unveiled new Intel Xeon 6 processors targeted at data center, edge, and cloud environments. Intel Xeon 6 processors will have new Efficient-cores (E-cores), code-named Sierra Forest, offering improvements such as 2.4x performance per watt improvement and 2.7x better rack density compared with 2nd Gen Intel Xeon processors. As a result, customers can replace older systems at a ratio of nearly 3-to-1, lower energy consumption substantially, fulfill sustainability goals, and improve business outcomes.

Further bolstering its overall enterprise AI proposition, Intel spotlighted client, edge, and connectivity portfolio offerings and capabilities. Specifically, Intel Core Ultra processors are powering new capabilities for productivity, security, and content creation. From my perspective, this can help stimulate organizations to refresh their PC fleets to provide further warrant for their AI investment priorities, especially as the next-generation Intel Core Ultra client processor family, code-named Lunar Lake, launching in 2024, will have more than 100 platform tera operations per second (TOPS) and more than 45 neural processing unit (NPU) TOPS for next-generation AI PCs. Impressively, Intel expects to ship 40 million AI PCs in 2024, with more than 230 designs, from ultra-thin PCs to handheld gaming devices.

Intel Mobile Edge Computing: Private 5G Rising

Intel and Cisco are expanding their collaboration to launch three innovation centers that provide tests bests for enterprises to assess private 5G use cases. The first innovation center opened in March 2024 at Cisco’s San Jose headquarters and will help customers test a wide array of private 5G solutions in a real-world environment through pilots and prototypes prior to full deployment. Additional labs are planned for Frankfurt, Germany and Tokyo, Japan.

Intel and Cisco are adeptly addressing growing enterprise demand for decreasing risk, cost, and complexity in the adoption of private 5G by delivering a sandbox environment to test early private 5G, validate proof-of-concept, and evaluate customized solutions ahead of full production rollouts. Cisco partners and other vendors who visit an innovation center will be able to validate their 5G end devices and demo systems with Intel Mobile Edge Computing applications and Cisco’s Mobility Services Platform.

Intel Q1 2024 Takeaways: Marching Forward with Transformation

Overall, we anticipate that there is an upside here with the Q1 2024 results because Gaudi 3 on the datacenter side with Xeon is showing promise for AI applications. We are seeing indications that new AI PC volumes could ramp ahead of schedule leading to better results for the back half of the year. The array of new Intel Gaudi, Xeon, and Core Ultra portfolio offerings immediately bolster the Intel enterprise AI proposition, bringing AI innovation everywhere throughout enterprise PC, data center, cloud, and edge environments.

As such, Intel can meet the swiftly evolving demands of the AI era, including GenAI workload optimization, by providing a unified set of agile solutions adapted to ensuring that customers and partners can attain business outcome gains from their expanding AI/GenAI investments. From our view the new foundry operating model provides greater transparency and accountability, setting the stage for improved decision making across the entire business.

Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses Intel’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Other Insights from The Futurum Group:

Intel Q4 and FY 2023 Results: Transformation Progress Continues

Intel Vision 2024: Intel Unleashes Gaudi 3 Led Enterprise AI Strategy

Bringing Intel Foundry to Life

Author Information

Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.

He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.

Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.

Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.


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