Intel Corporation

Analysis of Stock Decline After Earnings

• Earnings Performance:

  • Q4 earnings per share (EPS) were $0.13, slightly above the guidance of $0.12, yet full-year EPS was reported at -$0.13, marking a decline from the previous year.

• Revenue Trends:

  • For the full year, total revenue decreased by 2.1% year-over-year to $53.1 billion. The outlook for Q1 2025 forecasts revenue to fall between $11.7 billion and $12.7 billion, a sequential decline of 11% to 18%. This anticipated drop may have contributed to investor concerns, leading to the stock decline.

• Gross Margins and Cost Structure:

  • Non-GAAP gross margin came in at 42.1% for Q4, boosted by higher revenue and CHIPs grant receipts, though the full-year gross margin was significantly lower at 36%, a decline of 760 basis points due to impairments and inventory impacts.
  • The company stated that product margins will continue to face pressure throughout 2025, particularly due to increased competition and costs related to new products like Lunar Lake.

• Operating Cash Flow:

  • Operating cash flow for Q4 was positive at $3.2 billion but down $900 million sequentially due to restructuring charges. The company generated an adjusted free cash flow of negative $1.5 billion for the quarter.

• Macro and Competitive Pressures:

  • Multiple factors such as macroeconomic uncertainty, competitive dynamics, and seasonality are expected to exert downward pressure on revenues and margins.
  • Specific reference was made to the impacts of tariff uncertainties leading to customer behavior that affected inventory management, particularly in the PC market.

• Guidance and Future Outlook:

  • There is cautious guidance for Q1, with significant competition noted across all segments, contributing to a more tempered revenue outlook. Management conveyed this awareness of seasonality and macroeconomic factors.

The combination of reduced revenue expectations, declining margins, cautious guidance for the upcoming quarter, and overall market dynamics are considered key contributors to the 5% stock decline following the earnings report.