By Asa Fitch
Intel gave a tepid outlook for sales in its current quarter, signaling further challenges for its business amid signs that the PC market is starting to recover.
The company said sales were $15.4 billion for the fourth quarter, up from $14 billion a year before. Intel also made $2.7 billion of profit, reversing a loss in the year-ago period.
For its current quarter, Intel forecast between $12.2 billion and $13.2 billion of sales, higher than the same period last year but behind Wall Street expectations in a survey of analysts by FactSet.
Chief Executive Pat Gelsinger said the outlook was affected by factors including a rocky market for a programmable-chip unit that Intel is aiming to IPO and weaker-than-anticipated sales for Mobileye Global, an autonomous driving tech company in which Intel owns a majority stake.
Mobileye, which went public in 2022, made $637 million of sales for the fourth quarter. The company earlier warned that its sales were coming in lower than expected in 2024 as electric-vehicle sales stall and inventories build up.
Intel’s shares fell more than 7% in aftermarket trading.
Despite the headwinds, Gelsinger said he expected to see sales grow every quarter in 2024, both sequentially and year-over-year, as the company manages through a multiyear turnaround.
The company’s rising sales for the fourth quarter follow budding evidence that people and companies are buying more of the PCs where Intel’s chips are ubiquitous. After eight straight quarters of decline, research firm Gartner said this month that PC shipments had increased by 0.3% in the October-to-June period.
Intel said sales in the division that handles PC chips rose 33% to $8.8 billion in the fourth quarter.
Intel is also vying for a bigger foothold in chips that do AI calculations in data centers, where its competitor Nvidia is the dominant player. Buyers of data center equipment are spending heavily on Nvidia’s chips, using them to create advanced language- and image-generating systems such as OpenAI’s ChatGPT.
Gelsinger said Intel was positioned to grab a bigger part of the AI computing market as the focus shifts away from creating advanced AI systems and toward deploying them. The company’s AI and data center division’s sales, however, fell 10% to $4 billion in the fourth quarter.
Intel and its peers are betting that growing interest in AI software on PCs will give the market an added boost this year as companies and consumers buy new computers to harness the technology. Intel late last year launched new PC chips with features that speed up AI calculations.
Other chip-makers are starting to see benefits, too. South Korea’s SK Hynix, a major maker of memory chips that are critical in AI systems, on Wednesday reported a profit for its last quarter, besting analyst forecasts of a loss.
The results come at a crucial time for Intel and Gelsinger, who was hired three years ago to return the company to the ranks of the world’s most advanced chip makers.
Gelsinger has doubled down on Intel’s manufacturing operations, plowing tens of billions of dollars into new factories. He started a business making chips on contract for outside circuit designers — something the company had never succeeded at before.
Gelsinger said the company’s bid to leap ahead in manufacturing is on track. The contract chip-making unit has signed up a number of customers, too.
The U.S.’s Chips Act, legislation passed in 2022 that outlines $39 billion of grants for American chip factories, could also help offset the high cost of new factories. The first large grants from that pool of money are expected to be awarded in the coming weeks. Intel has submitted applications for funding for several of its projects, and could be in line to get billions of dollars to make chips for the defense industry.
Following its sale of part of Mobileye through an IPO, Intel is starting to operate its programmable-chip business as an independent entity this year. The company plans to subsequently IPO the programmable-chip unit, formed through its $16.7 billion purchase of Altera in 2015, within two to three years.