News Intel 2Q23 Earnings

[Hitman928]

Intel reported 2Q23 earnings.

Better than 1Q, still not great for them. 3Q projection seems like a bit of a disappointment to me.

Intel Non-GAAP EPS of $0.13 beats by $0.16, revenue of $12.9B beats by $760M (NASDAQ:INTC)

Intel press release (INTC): Q2 Non-GAAP EPS of $0.13 beats by $0.16.Revenue of $12.9B (-15.7% Y/Y) beats by $760M.Shares +1.5%.Forecasting third-quarter 2023 revenue of...

seekingalpha.com

 

[Hitman928]

Summary figures:




Foundry node commentary:

 

[Saylick]

INTC stock is up ~7% in after hours.

Looks like the guidance was more favorable than analysts expected.

Intel CFO David Zinsner said in a statement that part of the reason that Intel’s report was stronger than expected was because of the progress it has made towards slashing $3 billion in costs this year. Earlier this year, Intel slashed its dividend and announced plans to save $10 billion per year by 2025, including through layoffs.

Source: https://www.cnbc.com/2023/07/27/intel-intc-earnings-report-q2-2023.html

 

[Hitman928]

INTC stock is up ~7% in after hours.

Looks like the guidance was more favorable than analysts expected.


Source: https://www.cnbc.com/2023/07/27/intel-intc-earnings-report-q2-2023.html

Gross margins are still very low and I was hoping for better guidance given all the talk of the second half recovery. With guidance that is essentially seasonal uplift, that leaves only 4Q to make up a ton of ground. Good news is things are improving. Hopefully the recovery still comes and is just a quarter or two delayed.

 

[H433x0n]

Gross margins are still very low and I was hoping for better guidance given all the talk of the second half recovery. With guidance that is essentially seasonal uplift, that leaves only 4Q to make up a ton of ground. Good news is things are improving. Hopefully the recovery still comes and is just a quarter or two delayed.

Q3 projections put gross margin at 43%, that's honestly better than I expected. What were you expecting?

 

[Hitman928]

Q3 projections put gross margin at 43%, that's honestly better than I expected. What were you expecting?

Intel traditionally had GM in the 60s. Now, I don't expect them to jump back up to that quickly, but there was a lot of talk about a big 2nd half recovery, so I was hoping for at least 45-46% which would have at least matched 3Q22 GMs. Now it seems that the 2H recovery is going to be more mild than originally expected, or maybe will take a bit longer than expected. Like I said, it's good they are headed in the right direction, was just hoping for a quicker recovery. Intel can't afford to play down this low in GM for too long.

 

[H433x0n]

Intel traditionally had GM in the 60s. Now, I don't expect them to jump back up to that quickly, but there was a lot of talk about a big 2nd half recovery, so I was hoping for at least 45-46% which would have at least matched 3Q22 GMs. Now it seems that the 2H recovery is going to be more mild than originally expected, or maybe will take a bit longer than expected. Like I said, it's good they are headed in the right direction, was just hoping for a quicker recovery. Intel can't afford to play down this low in GM for too long.

They've got enormous CapEx, I don't expect them to get close to 60% for a while (if honestly ever again).

 

[controlflow]

Gross margins are still very low and I was hoping for better guidance given all the talk of the second half recovery. With guidance that is essentially seasonal uplift, that leaves only 4Q to make up a ton of ground. Good news is things are improving. Hopefully the recovery still comes and is just a quarter or two delayed.

Given the earnings reports from TSMC, Samsung Electronics and the HW portion of Microsoft earnings it was pretty clear that the macroeconomic environment is still pretty rough. I think this was about as much as you could expect. The Intel numbers certainly are still ugly but I think they are executing to their plan decently well and things look to be headed in the correct direction. Probably going to take into 1H24 before Intel has a shot at having a quarter that resembles anything close to what INTC used to put out.

 

[Hitman928]

They've got enormous CapEx, I don't expect them to get close to 60% for a while (if honestly ever again).

If they don't get decently north of 50% in the long term, I don't see how they have a sustainable business. Even with all the cost cutting, they still had $2.7B in negative cash flow last quarter. Being a 3rd party foundry is crazy expensive and only getting more expensive. If they don't have the GMs to pay for it, where will the money come from?

 

[Hitman928]

Given the earnings reports from TSMC, Samsung Electronics and the HW portion of Microsoft earnings it was pretty clear that the macroeconomic environment is still pretty rough. I think this was about as much as you could expect. The Intel numbers certainly are still ugly but I think they are executing to their plan decently well and things look to be headed in the correct direction. Probably going to take into 1H24 before Intel has a shot at having a quarter that resembles anything close to what INTC used to put out.

Yeah, there were some early warning signs, but those others only loosely correlate with the x86 market historically so I wasn't reading too much into them.

 

[H433x0n]

If they don't get decently north of 50% in the long term, I don't see how they have a sustainable business. Even with all the cost cutting, they still had $2.7B in negative cash flow last quarter. Being a 3rd party foundry is crazy expensive and only getting more expensive. If they don't have the GMs to pay for it, where will the money come from?

A GM of 50-55% would be fine. Intel != AMD, they fill different roles and are very different companies.

AMD can afford to remain lean and focus exclusively on x86 design. Contrast something like Alder/Raptor Lake vs Zen 4. For Zen 4 AMD develops a new core complex + IO die and then purchases DDR5 PHY / PCIe5 IP from Synopsis and outsources the fabrication to TSMC. It's extremely lean and efficient and works for them. As of now Intel doesn't have the option to take that route and so developing a new product both takes more manpower and time, some of this they're in the process of fixing by moving to using more industry standards but that's not going to happen overnight.

 

[turtile]

Intel traditionally had GM in the 60s. Now, I don't expect them to jump back up to that quickly, but there was a lot of talk about a big 2nd half recovery, so I was hoping for at least 45-46% which would have at least matched 3Q22 GMs. Now it seems that the 2H recovery is going to be more mild than originally expected, or maybe will take a bit longer than expected. Like I said, it's good they are headed in the right direction, was just hoping for a quicker recovery. Intel can't afford to play down this low in GM for too long.

They are effectively making all of their money from consumer chips. There is no way that Intel will be back in the 60s until they make data center products competitive with AMD and Nvidia. Most of the money is being invested in AI. Nvidia will be the winner here and AMD will have a small slice. If Sapphire Rapids weren't sold with Nvidia hardware, Intel would be in bad shape. I don't think any other product in the data center is making money for them.

 

[trivik12]

Why would Intel need > 50% to be sustainable? I think important thing at this point is release Meteor Lake, Sierra Forest and Granite rapids. We have to then see how completive those products are especially when it comes to efficiency. Once products are there, margins will improve over time.

 

[jpiniero]

Why would Intel need > 50% to be sustainable? I think important thing at this point is release Meteor Lake, Sierra Forest and Granite rapids. We have to then see how completive those products are especially when it comes to efficiency. Once products are there, margins will improve over time.

Would be tough to fund the fabs.

 

[trivik12]

that is possible. But they are already going for joint funding with Brookfield if I am not wrong. Plus long term further growth in Fab capacity have to come from Foundry business if it has any potential or not. Only time will tell and for now it looks tough barring govt mandate (Ramp C).

 

[Hitman928]

A GM of 50-55% would be fine. Intel != AMD, they fill different roles and are very different companies.

You're right, Intel needs significantly higher GM than AMD in the long term to sustain their fab development, something AMD doesn't have to worry about themselves.

AMD can afford to remain lean and focus exclusively on x86 design. Contrast something like Alder/Raptor Lake vs Zen 4. For Zen 4 AMD develops a new core complex + IO die and then purchases DDR5 PHY / PCIe5 IP from Synopsis and outsources the fabrication to TSMC. It's extremely lean and efficient and works for them. As of now Intel doesn't have the option to take that route and so developing a new product both takes more manpower and time, some of this they're in the process of fixing by moving to using more industry standards but that's not going to happen overnight.

Gross margin isn't operational expenses so Intel developing everything in house (which I don't think is even true anymore) wouldn't apply to their gross margin.

 

[Hitman928]

that is possible. But they are already going for joint funding with Brookfield if I am not wrong.

That was for a limited number of fabs (so far) and also means that they have to share in the revenue from those fabs so while it helps Intel get them built, it also subtracts from the money they get from the fabs once they are operational. If I remember correctly, there is even a minimum revenue guarantee for Brookfield in the deal so once the revenue share portion of the contract goes into effect, Intel has to pay Brookfield a certain amount of money on an ongoing basis, even if the fab is sitting idle.

Plus long term further growth in Fab capacity have to come from Foundry business if it has any potential or not. Only time will tell and for now it looks tough barring govt mandate (Ramp C).

Yeah, if the fab side of the business becomes self sustainable then obviously the products side GM don't matter for the fabs, but then the overall GM will reflect this as well. I don't see the fabs being self sustaining for quite a while though (and neither does Intel based upon the color of their commentary) which means they need the products side to have a legit recovery to sustain the company's vision for a while yet.

 

[Abwx]

Detailed report for whom is used to broken down numbers :

Intel Reports Second-Quarter 2023 Financial Results

www.intc.com

 

[Tuna-Fish]

Given the earnings reports from TSMC, Samsung Electronics and the HW portion of Microsoft earnings it was pretty clear that the macroeconomic environment is still pretty rough. I think this was about as much as you could expect. The Intel numbers certainly are still ugly but I think they are executing to their plan decently well and things look to be headed in the correct direction. Probably going to take into 1H24 before Intel has a shot at having a quarter that resembles anything close to what INTC used to put out.

Agreed. I think this is what recovery looks like: Not instant smashing success, but good investment into the future and trimming the excess fat, while raising revenues to be a little less living on the edge. If they had better DC chips they would be doing even better, but this is a much healthier quarter for them than the last one.

 

[A///]

I had my physical calendar circled in yellow marker today and didn't write in why it was circled. bugged me the whole day at work. now i remember why. Going to read the lay reports later because most of this stuff is beyond my need to read as a non shareholder.

 

[A///]

someone remind me were intels q2s good last year riding on the high of covid buys or were they slumming it then too?

 

[Hitman928]

someone remind me were intels q2s good last year riding on the high of covid buys or were they slumming it then too?

Revenue was down a bit but gross margin was down more significantly from an historical protective.

 

[Markfw]

Revenue was down a bit but gross margin was down more significantly from an historical protective.

Would it be too much to ask, or too hard, to put up a little spreadsheet type thing. This Q, last Q, Y/Y Q, etc ???

 

[jpiniero]

Would it be too much to ask, or too hard, to put up a little spreadsheet type thing. This Q, last Q, Y/Y Q, etc ???

Just go to intc.com.

 

[turtile]

Would it be too much to ask, or too hard, to put up a little spreadsheet type thing. This Q, last Q, Y/Y Q, etc ???

https://d1io3yog0oux5.cloudfront.net/_a378311730f38d1b5a77a0bf07517648/intel/db/887/8960/earnings_presentation/Q2%272023+Earnings+Deck+-+Final.pdf