Q4 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- Intel is aggressively focusing on regaining market share in both client and data center segments, aiming to "win every socket" and demonstrating commitment to stem market share decline, which could drive revenue growth.
- Intel's next-generation client product, Panther Lake, will be produced using their advanced 18A process node, indicating confidence in their process technology, potentially improving product competitiveness and margins.
- Intel Foundry Services (IFS) expects to improve its cost structure and margins in 2025, with more wafers coming back in-house and better cost structure on Intel 3 and 18A nodes, enhancing profitability.
- Increased competition and pricing pressure are expected to weigh on Intel's gross margins throughout 2025, particularly in the client computing group (CCG) and data center markets. Michelle Holthaus stated that Intel is facing "increased competition as we see new market entrants particularly come into CCG," leading to "more pressured" margins due to the cost of products like Lunar Lake. Additionally, Intel will be "fighting for every socket" to stem market share decline, which may require aggressive pricing strategies that could further compress margins.
- Artificially elevated Q4 revenue due to tariff-related pull-ins may lead to weaker demand in future quarters. David Zinsner noted that customers may have pulled forward orders into Q4 as a hedge against potential tariffs: "customers ordered more than we think they were digesting...I just thought it was a little bit of hedging going on by customers that pulled revenue into the fourth quarter and away from the first quarter." This could result in softness in subsequent quarters as the pull-forward effects reverse.
- Ongoing cost pressures and limited gross margin improvement in 2025 due to high manufacturing costs and product mix, particularly with products like Lunar Lake. David Zinsner mentioned that "there won't be a lot of lift in that business unit through the year" due to cost structure pressure from Lunar Lake, and significant margin improvements may not materialize until products like Panther Lake ramp up in 2026.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Operating Expenses (OpEx) | FY 2025 | $17.5B | $17.5B | no change |
Noncontrolling interest | FY 2025 | $700M | $500M – $700M | lowered |
Revenue | Q1 2025 | no prior guidance | $11.7B – $12.7B | no prior guidance |
Gross margin (Non-GAAP) | Q1 2025 | no prior guidance | 36% | no prior guidance |
Tax Rate | Q1 2025 | no prior guidance | 12% | no prior guidance |
EPS | Q1 2025 | no prior guidance | breakeven | no prior guidance |
Intel Foundry revenue | Q1 2025 | no prior guidance | flat to down modestly | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q4 2024 | 13.3B to 14.3B | 14,260 million | Met |
Gross Margin | Q4 2024 | ~39.5% | ~39.16% (calculated from Revenue of 14,260Minus COGS of 8,676, then divided by 14,260) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Efforts to regain market share in client and data center segments | Discussed across Q1–Q3 with a focus on product simplification, roadmap execution, and x86 leadership. | Intel reiterated an aggressive approach to fight for every socket, highlighted new launches (Granite Rapids, Panther Lake) to close competitive gaps. | Consistent focus each quarter, with stronger competitive messaging in Q4 |
Intel 18A process technology and next-generation client products (Panther Lake, Lunar Lake) | Emphasized across Q1–Q3 as part of “five-nodes-in-four-years” strategy, with Lunar Lake shifting to high volume, Panther Lake as lead product for Intel 18A. | Panther Lake on Intel 18A in second half of 2025, Lunar Lake costs still pressuring margins. | Ongoing ramp with near-term cost headwinds from Lunar Lake, longer-term margin benefits from 18A |
Intel Foundry Services cost structure and profitability | Persistent operating losses and restructuring efforts detailed in Q1–Q3, with aim to improve ROI and margin stacking as internal volume grows. | Reiterated breakeven target by end of 2027, focusing on shifting wafer volume to advanced nodes. | Steady narrative, gradually clarifying cost structure improvements |
AI PC category, including Core Ultra processors and associated upgrade cycle | Across Q1–Q3, emphasized AI PC expansion, Lunar Lake efficiency, and expected refresh cycles. | Strong position with Core Ultra across Meteor Lake and Arrow Lake, targeting 100M+ AI PCs by end of 2025. | Stable focus on growing AI PC category and driving a new upgrade cycle |
AI accelerator offerings (Gaudi 3, Falcon Shores) | Q1–Q3 highlighted Gaudi 3’s promise but slower uptake and missed revenue targets; Falcon Shores was slated for late 2025. | Acknowledged Gaudi learnings, decided Falcon Shores will be an internal test chip only; focusing on Jaguar Shores for rack-scale AI. | Shifted roadmap away from Falcon Shores as an external product |
Gross margin challenges from competition, product mix, manufacturing costs | Over Q1–Q3, Intel cited start-up costs, advanced node transitions, and product mix (e.g., Lunar Lake) as ongoing headwinds. | Lunar Lake’s memory-in-package design and competitive pricing pressure continue to weigh on margins. | Challenges persist, with improvements expected as Panther Lake and 18A ramp |
Shift of wafer production from external foundries back to internal leading-edge nodes | Repeated from Q1–Q3, positioning for improved margins and factory utilization. | Panther Lake confirmed fully in-house on Intel 18A, expecting better cost structure. | Continues, viewed as key to margin expansion |
Potential artificially inflated revenue from tariff-related pull-ins | No mention in Q1–Q3 [no relevant data]. | Some Q4 revenue pulled in from Asian customers hedging against tariffs. | New mention in Q4 |
Memory-in-package approach for Lunar Lake and its impact on profit margins | Cited in Q2–Q3 as a unique design causing margin pressure. | Intel buying memory and selling at cost, compressing margins through 2025. | Ongoing margin headwind, not repeated in future products |
Cost-saving initiatives and restructuring efforts aimed at long-term profitability | Present in Q1–Q3 with workforce reductions, portfolio simplifications, and CapEx cuts. | Continued resizing of expenses, capital spending adjustments, non-core asset monetization. | Sustained focus to meet financial targets |
Challenges in achieving targeted revenue from Gaudi products | Q3 noted slower Gaudi uptake and missed revenue goals; Q1 was optimistic about $500M target. | Still not participating meaningfully in cloud-based AI data centers, shifting roadmap. | Remains a challenge, pivoting strategy |
Slower demand environment and weaker near-term outlook in data center and enterprise | Noted in prior calls (especially Q1–Q2) with inventory overhang and cautious enterprise spending. | Macroeconomic uncertainty, seasonality, stronger competition hurting Q1 2025 guidance. | Ongoing caution despite improved roadmaps |
Supply constraints in wafer-level assembly impacting AI PC product availability | Mentioned only in Q1, limiting Core Ultra shipments. | No mention in Q4. | Topic no longer referenced |
Concerns that cost cuts alone may not solve product competitiveness issues | Not explicitly addressed in Q1–Q3, though prior calls stressed balancing cost and roadmap progress. | Management acknowledged the need for better product execution alongside cost actions. | Newly emphasized in Q4 |
Ambitions to achieve a 60% gross margin and 40% operating margin by the end of the decade | Mentioned in Q2 (60% GM, 40% OM) and partially in Q1 (long-term margin goals). | No mention in Q4. | Not repeated recently |
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Margin Outlook
Q: What's the gross margin outlook for 2025?
A: David Zinsner explained that margins will be under pressure due to higher costs, especially from Lunar Lake, but they expect improvement as Panther Lake ramps in 2026. They project a fall-through in the range of 40% to 60% for 2025, returning to 60% or more in 2026. -
Data Center Competitiveness
Q: How will Intel close the data center gap?
A: Michelle Holthaus acknowledged a gap with competitors but stated that Granite Rapids is a first step in closing it. They are focused on consistent execution and may consider external manufacturing for data center products if it helps meet market needs. -
CapEx Reduction
Q: Is CapEx really coming down this year?
A: David Zinsner confirmed that CapEx guidance is reduced to $20 billion, driven by better utilization of existing assets under construction. They're limiting external purchases and adjusting payment terms, but not using any unusual financing methods. -
Free Cash Flow Path
Q: How will you turn free cash flow positive?
A: David Zinsner stated they are focusing on cash flow from operations, managing working capital, and adjusting CapEx. They expect over $10 billion in offsets and aim to improve adjusted free cash flow for 2025. -
Foundry Breakeven Target
Q: How will you achieve foundry breakeven in 2027?
A: David Zinsner said they're aiming for breakeven primarily through internal wafers, benefiting from higher-margin EUV wafers. They expect a small contribution from external customers but are focused on improving efficiency and cost structure. -
Pricing and Competitiveness
Q: Will margin pressure from competition persist?
A: Michelle Holthaus noted increased competition and the need to be aggressive in pricing to win share in client and data center markets, which may put ongoing pressure on margins. -
EUV Wafer Mix Increase
Q: What is the outlook for EUV wafer mix?
A: David Zinsner stated that EUV wafer mix will significantly increase, with products like Panther Lake on the 18A node. EUV wafers have better pricing, with the price increasing 3x relative to cost, improving gross margins. -
Strategy Evolution for IFS
Q: How has IFS strategy evolved?
A: David Zinsner explained they are cautious about spending ahead of success, focusing on capital efficiency, and committed to building a world-class foundry without overinvesting. -
Tariff Impact on Revenue
Q: Have tariffs affected revenue timing?
A: David Zinsner observed that some customers pulled forward orders, possibly due to tariff concerns, particularly in Asia, which may have shifted revenue into Q4 from Q1. -
Non-Controlling Interest Impact
Q: How to model non-controlling interest in EPS?
A: David Zinsner explained that non-controlling interest includes Mobileye and SCIPs, and it will increase as they sell stakes in businesses. It affects both GAAP and non-GAAP EPS, but exact forecasting is difficult beyond guided figures. -
Adjustment to Falcon Shores
Q: What's behind the Falcon Shores adjustment?
A: Michelle Holthaus decided to adjust plans for Falcon Shores after reviewing roadmaps and customer needs, focusing on providing a full rack-scale solution with Jaguar Shores instead. -
Engagement with Government
Q: How are you working with the Trump administration?
A: David Zinsner noted positive engagement, emphasizing alignment on bringing semiconductor manufacturing back to the U.S., which supports national security and job creation. -
Outsourcing Considerations
Q: Will you outsource more to external foundries?
A: Michelle Holthaus said they are open to external manufacturing for future designs if it helps meet market needs and allows customers to win, balancing internal and external production. -
Client Market Share
Q: How will you address client share decline?
A: Michelle Holthaus emphasized the importance of stemming market share loss in client computing by being aggressive and winning every socket, despite margin pressures from products like Lunar Lake. -
SCIP Impact on EPS
Q: How does SCIP affect EPS modeling?
A: David Zinsner clarified that SCIP and other non-controlling interests are taken against non-GAAP EPS, and as they sell stakes in businesses like Mobileye and potentially Altera, NCI increases.