Computer processor maker Intel (NASDAQ:INTC) reported Q4 CY2024 results topping the market’s revenue expectations, but sales fell by 7.4% year on year to $14.26 billion. On the other hand, next quarter’s revenue guidance of $12.2 billion was less impressive, coming in 5.4% below analysts’ estimates. Its non-GAAP profit of $0.13 per share was 8.7% above analysts’ consensus estimates.
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Intel (INTC) Q4 CY2024 Highlights:
- Revenue: $14.26 billion vs analyst estimates of $13.8 billion (7.4% year-on-year decline, 3.3% beat)
- Adjusted EPS: $0.13 vs analyst estimates of $0.12 (8.7% beat)
- Adjusted Operating Income: $1.37 billion vs analyst estimates of $544.8 million (9.6% margin, beat)
- Revenue Guidance for Q1 CY2025 is $12.2 billion at the midpoint, below analyst estimates of $12.9 billion
- Adjusted EPS guidance for Q1 CY2025 is $0.00 at the midpoint, below analyst estimates of $0.09
- Operating Margin: 2.9%, down from 16.8% in the same quarter last year
- Free Cash Flow was -$1.5 billion compared to -$1.31 billion in the same quarter last year
- Inventory Days Outstanding: 128, down from 137 in the previous quarter
- Market Capitalization: $85.18 billion
“The fourth quarter was a positive step forward as we delivered revenue, gross margin and EPS above our guidance,” said Michelle Johnston Holthaus, interim co-CEO of Intel and CEO of Intel Products.
Company Overview
Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ:INTC) is a leading manufacturer of computer processors and graphics chips.
Processors and Graphics Chips
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Over the last five years, Intel’s demand was weak and its revenue declined by 5.9% per year. This was below our standards and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Intel’s recent history shows its demand has stayed suppressed as its revenue has declined by 8.2% annually over the last two years. 
This quarter, Intel’s revenue fell by 7.4% year on year to $14.26 billion but beat Wall Street’s estimates by 3.3%. Company management is currently guiding for a 4.1% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Intel’s DIO came in at 128, which is 10 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.
Key Takeaways from Intel’s Q4 Results
We liked that Intel beat analysts’ revenue, operating profit, and EPS expectations this quarter. On the other hand, both its revenue and EPS guidance for next quarter missed significantly. Regarding the outlook, management said "Our Q1 outlook reflects seasonal weakness magnified by macro uncertainties, further inventory digestion and competitive dynamics." Overall, we think this was a solid quarter with disappointing guidance. The stock traded up 1.5% to $20.38 immediately following the results, showing that expectations heading into the print were likely low for a company that has reported some weak quarterly results in the last year-plus.
Indeed, Intel had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.