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    Intel Corp (INTC)

    Q2 2024 Summary

    Published Jan 6, 2025, 8:15 PM UTC
    Initial Price$42.54March 27, 2024
    Final Price$30.59June 27, 2024
    Price Change$-11.95
    % Change-28.09%

    What went well

    • Intel has secured $15 billion in lifetime deal value of committed deals in its Foundry Services, particularly in advanced packaging, and the release of the Intel 18A PDK 1.0 has accelerated customer engagement.
    • The company is implementing significant structural improvements to become both a world-class foundry and a world-class fabless company, addressing inefficiencies to enhance profitability and competitiveness in the long term.
    • By bringing manufacturing back in-house starting in 2025-2026, especially with products like Panther Lake, Intel expects to improve its cost structure and gross margins through more competitive processes and reduced outsourcing.

    What went wrong

    • Intel expects sequential revenue growth to be below seasonal in Q3, with the client business flat to down and modest growth in data center and edge markets, due to weaker spending across consumer and enterprise markets, especially in China, and elevated customer inventory levels.
    • Gross margins are projected to decline, with an expected gross margin of approximately 38% in Q3 and an EPS of negative $0.03, impacted by modest revenue growth, continued ramp of new manufacturing nodes, and a heavier dependence on external wafers, which will pressure gross margins.
    • Intel is suspending its dividend at the beginning of the fourth quarter to prioritize liquidity, indicating potential cash flow challenges and reduced returns for shareholders.

    Q&A Summary

    1. Impact of Restructuring on Strategy
      Q: Do restructuring actions affect your R&D, Foundry plans, CHIPS funding?
      A: Our strategy remains on track despite restructuring. We're confident in executing CHIPS Act milestones and maintaining our $15 billion long-term Foundry revenue target by the end of the decade. We're focusing on capital efficiency and aligning investments to market conditions.

    2. Spending Cuts and Structural Changes
      Q: Are spending cuts leading to structural changes impacting competitiveness and targets?
      A: We're undertaking a clean-sheet analysis to become a world-class Foundry and fabless company. We've identified inefficiencies and are making significant structural changes to improve capital footprint and efficiency. Despite these changes, we believe our long-term financial goals are still achievable.

    3. Gross Margin Outlook Beyond '25
      Q: How should we think about gross margins beyond '25 amid investments and outsourcing?
      A: In 2026, we'll shift back to internal manufacturing, bringing more wafers in-house, which will meaningfully improve our cost structure. CapEx adjustments will benefit us as depreciation becomes less of a headwind. We expect 2026 to be a good year for gross margins, supported by leading-edge wafers and competitive products.

    4. Server Roadmap Competitiveness
      Q: Where does shipping Sierra Forest and Granite Rapids put you competitively?
      A: Early feedback on Sierra Forest is very positive, offering over 25% TCO value to customers. Granite Rapids begins ramping this quarter with encouraging signs. Clearwater Forest on 18A is showing excellent progress. We believe our roadmap enhances competitiveness and stabilizes our market share.

    5. Foundry Strategy Amid CapEx Cuts
      Q: How can you execute Foundry plans with lower CapEx and increased outsourcing?
      A: Our Foundry strategy remains unchanged. We're aligning capacity to committed orders and focusing on capital efficiency. Having completed major investments to catch up, we're now harvesting those investments. Success in advanced packaging, which requires less capital, is progressing well.

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