Intel Corporation, Q3 2024 Earnings Call, Oct 31, 2024 - NasdaqGS:INTC

NasdaqGS:INTC

John William Pitzer, Corporate Vice President of Corporate Planning & Investor Relations, introduced the Q3 2024 earnings call for Intel Corporation. He highlighted that the earnings release and presentation are available on the Investor Relations website, intc.com. Pitzer noted that the discussion would include forward-looking statements and non-GAAP financial measures, and he referred to the company's SEC filings for more information on risks and reconciliations. He then introduced CEO Pat Gelsinger and CFO David Zinsner for their comments and the Q&A session.

**- Cost Reduction Plan: Completed the majority of headcount actions, on track for a 15% workforce reduction by year-end, reduced capital expenditures by over 20%, and simplified and streamlined parts of the portfolio to unlock efficiencies.

• Financial Actions: Significant restructuring charges in Q3 to rightsize the company, including impairments related to Intel 7 equipment and space.

• Product Focus: Narrowing focus on fewer projects to maximize the value of the x86 franchise, integrating software business into core business units, and refocusing NEX on networking and telco.

• Client Computing Group (CCG): Leading the AIPC category with the launch of Intel Core Ultra 200V Series processors (Lunar Lake), which sets a new standard for mobile AI performance. Plans to ship over 100 million AIPCs by the end of 2025.

• Data Center and AI (DCAI): Launched Xeon 6 (Granite Rapids) and Gaudi 3 AI accelerator, aiming to provide enterprise customers with greater choice, flexibility, and lower total cost of ownership.

• Network and Edge (NEX): Focusing on networking and telco, moving edge business into CCG to leverage core client business and extend leadership in vertical edge solutions.

• Intel Foundry Services (IFS): Making progress on Intel 18A, with lead vehicles meeting early milestones. Secured multiyear, multibillion-dollar commitment from AWS, and added 2 additional 18A wafer design wins.

• Strategic Initiatives: Creating an independent subsidiary for Intel Foundry to enhance operational integrity and potential funding, and maintaining a strong focus on x86 leadership while simplifying product lines and SKUs.

• Future Outlook: Confident in the company's strategy to improve efficiency, profitability, and long-term shareholder value. Emphasized the importance of disciplined execution and market competitiveness.**

**- Q3 revenue was $13.3 billion, up 4% sequentially, in the upper half of the range provided in August.

• Non-GAAP gross margins were 18%, down from 38% guidance due to $3 billion in non-cash impairment and accelerated depreciation charges for Intel 7.

• EPS was a loss of $0.46, impacted by the $3 billion charge.

• Operating cash flow was $4.1 billion, up $1.8 billion sequentially.

• Adjusted free cash flow was negative $2.7 billion.

• Q4 revenue guidance is $13.3 billion to $14.3 billion, with a gross margin of 39.5% and EPS of $0.12 on a non-GAAP basis.

• 2025 OpEx is expected to be $17.5 billion, with gross and net CapEx of $20 billion to $23 billion and $12 billion to $14 billion, respectively.

• Positive adjusted free cash flow is expected in 2025.

• Gross margin expansion could be muted in 2025, particularly in the second half, but is expected to significantly improve in 2026.

• The company is focused on achieving trend line revenue growth of 3% to 5% annually, with the ability to scale up to 7% to 9% as demand dictates.**