Shares of chipmaker Intel fell sharply Friday after the company badly missed estimates with its forecast for the current quarter. Intel stock plummeted nearly 12% on the news.
The Santa Clara, Calif.-based company late Thursday reported adjusted earnings of 54 cents a share on sales of $15.41 billion in the December quarter. Analysts polled by FactSet had expected Intel earnings of 45 cents a share on sales of $15.16 billion. In the year-earlier period, Intel earned 10 cents a share on sales of $14.04 billion.
Intel's Q4 report marked a return to growth after eight straight quarters of declining earnings and seven straight quarters of declining sales on a year-over-year basis.
However, for the first quarter, Intel predicted adjusted earnings of just 13 cents a share on sales of $12.7 billion. Analysts had been looking for earnings of 34 cents a share on sales of $14.24 billion for the March quarter. In the same quarter last year, Intel lost 4 cents a share on sales of $11.72 billion.
Worse yet, under generally accepted accounting principles, or GAAP, Intel expects to lose 25 cents a share in the first quarter.
Intel Stock Tumbles After Report
On the stock market today, Intel stock plunged 11.9% to close at 43.65.
Intel stock tripped sell signals Friday when it dived below its 50-day moving average line, a key support level, on heavy trading volume.
On Nov. 15, Intel stock broke out of a nine-week consolidation pattern at a buy point of 40.07, according to IBD MarketSmith charts. It climbed as high as 51.28 on Dec. 27 before pulling back.
At least seven Wall Street firms slashed their price targets on Intel stock after the earnings report. And two other firms downgraded Intel shares to hold from buy.
Meanwhile, two firms raised their price targets on Intel, but they are neutral to negative on the stock.
First-Quarter Slip Seen As Blip
On a conference call with analysts, Chief Financial Officer David Zinsner blamed the lower first-quarter guide on "material inventory corrections" in automotive and programmable chips. He also predicted a "slightly sub-seasonal" outlook for Intel's core businesses.
Chief Executive Pat Gelsinger sees the disappointing Q1 outlook as a blip.
"Importantly, we see this as temporary, and we expect sequential and year-on-year growth in both revenue and EPS (earnings per share) for each quarter of FY (fiscal year) 2024," he said on the call.
Data Center Sales Weak
A resurgent PC business drove Intel's better-than-expected Q4 results. The company's Client Computing Group reported a 33% increase in revenue to $8.8 billion.
Intel's overall revenue rose 10% year over year, with data center and networking chip declines offsetting the PC chip gains.
Intel's Data Center and AI unit saw sales decline 10% to $4 billion in the fourth quarter. The company's Network and Edge business reported a 24% decrease in sales to $1.5 billion.
Intel's data-center revenue is forecast to decline by a double-digit percentage in the first quarter from the previous quarter. That is related to the ongoing shift from traditional servers, where Intel is strong, to artificial intelligence systems from the likes of rivals AMD and Nvidia.
"Intel's core data-center business is challenged by a shift to accelerated computing architectures and direct competition from AMD and Arm," Needham analyst Quinn Bolton said in a client note. "We expect AI to remain the spending priority in the data center for the next several quarters. To that end, dollars will continue moving away from Intel's core competency."
Bolton downgraded Intel stock to hold from buy after the earnings report.
Intel Announces Foundry Partnership
Early Thursday, Intel announced a foundry collaboration with contract chipmaker United Microelectronics. The two companies will collaborate on the development of a 12-nanometer semiconductor process platform to address high-growth markets at mature nodes. Those markets include mobile, communication infrastructure and networking.
Last September, Intel announced an agreement with contract chipmaker Tower Semiconductor. Under that deal, Intel will provide foundry services and 300-millimeter-wafer manufacturing capacity to help Tower serve its customers globally.
Chip Stocks On The Move
Other semiconductor stocks reporting earnings on Thursday included Intel spinoff Mobileye Global and European chipmaker STMicroelectronics. Both firms reported Q4 results before the market open Thursday.
Mobileye delivered fourth-quarter numbers in line with its preliminary results provided on Jan. 4. However, its sales forecast for 2024 of $1.9 billion was below estimates for $1.98 billion.
The maker of autonomous-driving and driver-assistance technologies earned an adjusted 28 cents a share on sales of $637 million in the December quarter. On a year-over-year basis, Mobileye earnings rose 4% as sales increased 13%.
STMicro posted better-than-expected Q4 earnings on roughly in-line sales. However, its guidance was soft. The automotive and industrial chipmaker earned $1.14 a share on sales of $4.28 billion in the December quarter. Year over year, its earnings decreased 14% while sales dropped 3%.
For the first quarter, STMicro predicted sales of $3.6 billion, missing the consensus target of $4.08 billion.
On Thursday, Mobileye stock rose 1.2% to 27.95, while STMicro shares declined 0.8% to 45.60.
Intel Stock Has Mediocre Composite Rating
Intel stock ranks fifth out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has a mediocre IBD Composite Rating of 78 out of 99.
STMicro ranks 10th in the chipmaker group with a Composite Rating of 63.
Meanwhile, Mobileye ranks No. 17 in IBD's fabless semiconductor industry group. It has a Composite Rating of 62.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
