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Intel Q4 and FY 2023 Results: Transformation Progress Continues

Intel Q4 and FY 2023 Results: Transformation Progress Continues

The News: Intel reported its fourth quarter (Q4) revenue of $15.4 billion, up 10% year-over-year (YoY). Full year revenue was $54.2 billion, down 14% YoY. Read the Intel press release here.

Intel Q4 and FY 2023 Results: Transformation Progress Continues

Analyst Take: Intel Q4 2023 produced solid results by surpassing expectations for the fourth consecutive quarter as revenue came in at the higher end of its guidance. Q4 2023 financial highlights include Q4 earnings per share (EPS) attributable to Intel was $0.63, non-generally accepted accounting principles (non-GAAP) EPS attributable to Intel was $0.54, full year EPS attributable to Intel was $0.40, and non-GAAP EPS attributable to Intel was $1.05.

Intel is on track to fulfill its objective of achieving its five nodes in four years (5N4Y) strategy. Intel 3 became Intel’s first advance node offered to Intel Foundry Services (IFS) customers. Also, aimed at meeting challenges beyond intel 18A, Intel began installation of the onsite High-NA extreme ultraviolet (EUV) tool in Oregon.

Intel Business Unit Q4 2023 Breakout

Intel Q4 and FY 2023 Results: Transformation Progress Continues
Image Source: Intel

Intel’s Client Computing Group (CCG) reported Q4 2023 revenue of $8.8 billion, up 33% YoY due to improved alignment of sell-in and sell-through across the PC market. Data Center and AI (DCAI) reported $4.0 billion, down 10% YoY due to CPU total addressable marker (TAM) contraction, ongoing competitive pressure (i.e., AMD), and Programmable Solutions Group (PSG) inventory correction. Network and Edge (NEX) reported $1.5 billion, down 24% YoY linked to continued demand softness and elevated customer inventory. Mobileye reported $637 million, up 13% YoY fueled by EyeQ shipments. IFS reported $291 million, up a remarkable 63% YoY underpinned by acceleration of Intel’s traditional packages.

Plus, Intel is forecasting Q1 2024 revenue of $12.2 billion to $13.2 billion, expecting Q1 EPS attributable to Intel of $(0.25), and non-GAAP EPS attributable to Intel of $0.13. However, this forecast was notably lower than analyst estimates that called for $14.2 billion.

From our view, Intel finished Q4 2023 on a high note, although it is taking it on the nose due to a soft guide that came in well below expectations. Mobileye is a big factor in the softness balanced against the great finish, though, for both Mobileye and IFS. Plus, Intel CEO Pat Gelsinger indicated that the company would see its earnings improve both quarter-over-quarter (QoQ) and YoY throughout 2024. He is also confident in the AI PC ramp driven by the Core Ultra offering and the overall AI accelerator market and CPU market through new Xeon offerings highlighted by the 5th Gen Xeon Scalable processor debut.

We are also encouraged that Intel continued to drive operational efficiencies in Q4 2023, executing its goal to deliver $3 billion in cost savings in 2023. This accomplishment provides precedent to unlock more efficiencies throughout 2024 and beyond as Intel’s gains the built-in benefits of its swiftly evolving internal foundry model.

IFS Burgeoning: The UMC Connection

Fortifying its foundry strategy, Intel entered a partnership with United Microelectronics Corporation (UMC) to develop a 12nm semiconductor process platform to address high-growth markets such as mobile, communications infrastructure, and networking. The collaboration builds on Intel’s commitment to partner with Taiwan-based firms to better serve global customers and expand its mature process capabilities for foundry customers.

From our view, the alliance is mutually beneficial to both Intel and UMC by broadening customer access to a geographically diverse semiconductor supply chain and providing UMC with more capacity, helping to accelerate its roadmaps and raise the profile of its process technology R&D. The deal reinforces Intel’s integrated device manufacturing (IDM) strategy (i.e., IDM 2.0) with established or planned manufacturing sites and investments in Arizona, New Mexico, Ohio, and Oregon alongside Germany, Ireland, Israel, Malaysia, and Poland. Importantly, IFS has made progress with new customers across the Intel 16, Intel 3, and Intel 16A process technologies and is continually growing its foundry ecosystem.

Intel’s AI Everywhere Campaign

The debut of 5th Gen Intel Xeon processors represents the second Xeon family upgrade in less than a year, developed to provide customers faster memory and more compute at the same power envelope as the prior generation. The processors are software- and platform-compatible with 4th Gen Intel Xeon processors, enabling customers to upgrade and optimize the durability of infrastructure investments while decreasing costs and carbon emissions.

Overall, we believe that 5th Gen Intel Xeon processors can ensure organizations gain better performance per watt for demanding network and edge workloads. The new Intel Xeon platform supports specialized AI and virtualized workloads while lowering TCO with built-in accelerators that ensure organizations can build on their existing investments with a solution that is fully compatible with previous generation processor offerings while needing only minimal testing and validation.

Intel Core Ultra: AI PC Rising

The AI PC experience, as Intel calls it, arrived with the launch of Intel Core Ultra processors, code-named Meteor Lake, featuring Intel’s first integrated neural processing unit (NPU) for power-efficient AI acceleration and local inference on the PC. Intel Core Ultra launched December 14, 2023, integral to the AI Everywhere campaign kickoff. Intel’s entry into the AI PC space is an exciting and significant—albeit unsurprising—new chapter in the race to complement cloud-based AI applications with entirely new layers of on-device AI capabilities, particularly in consumer and enterprise PCs.

From our perspective, Core Ultra represents an inflection point in Intel’s client processor roadmap. For starters, it is the first client chiplet design enabled by Foveros packaging technology. Foveros enables Intel to build processors with compute tiles stacked on top of each other rather than side by side, allowing for better performance within a smaller footprint. It also allows Intel to mix and match compute tiles to optimize for cost and power efficiency.

Moreover, Intel 4 process technology is helping Intel deliver significant power-efficient performance improvements (roughly 50% compared with 13th generation Raptor Lake), which Intel really needed to ramp up. The new processor brings discrete-level graphics performance with onboard Intel Arc graphics. And Core Ultra comes equipped with Intel’s integral NPU, which is essentially the built-in, on-chip AI accelerator and inference engine that enables the logic and control needed to execute machine learning (ML) algorithms.

Intel Q4 and FY 2023 Takeaways: Marching Forward with Transformation

Overall, Intel made good progress in 2023. The Q1 2024 guide is a wrinkle, but the improvement in process leadership with its IDM 2.0 strategy delivering 5 nodes in 4 years is indicative of progress in the company’s turnaround.

The AI PC is an inflection point. The impact of Arm targeting the space will mean more competition, but the Core Ultra and the early-in-market AI PC offerings will help Intel get an early lead. If it gets its use cases correct, these offerings could be helpful in protecting market share as Qualcomm and AMD offer competitive products with higher initial specs but later GA dates.

Work needs to be done, but Intel has made good progress even though some will be quick to point out the guide. It is noteworthy, but not entirely indicative of the longer-term competitiveness of Intel. If Gelsinger delivers on the improved metrics both QoQ and YoY, 2024 can prove a positive year for Intel.

Daniel Newman provides insights into the latest Intel earnings on X:

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.

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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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