Intel Corporation (INTC) Bundle
Understanding Intel Corporation (INTC) Revenue Streams
Understanding Intel Corporation’s Revenue Streams
Intel Corporation's revenue for Q3 2024 was $13.3 billion, a decrease of $874 million or 6% from Q3 2023. For the year-to-date (YTD) 2024, total revenue reached $38.8 billion, which is roughly flat compared to $38.8 billion in YTD 2023.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 Revenue ($B) | Q3 2023 Revenue ($B) | YTD 2024 Revenue ($B) | YTD 2023 Revenue ($B) |
|---|---|---|---|---|
| Client Computing Group (CCG) | $7.1 | $7.6 | $21.4 | $19.6 |
| Data Center and AI (DCAI) | $3.3 | $3.0 | $9.4 | $9.1 |
| Intel Foundry | $0.067 | $0.3 | $0.171 | $0.661 |
| Altera | $0.4 | $0.7 | $1.1 | $2.4 |
| Mobileye | $0.5 | $0.6 | $1.3 | $1.6 |
| All Other | $1.0 | $1.4 | $2.8 | $4.3 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for Q3 2024 reflects a 6% decrease compared to Q3 2023. For YTD 2024, revenue remained relatively unchanged at $38.8 billion, marking a slight growth of 0.05% from YTD 2023.
Contribution of Different Business Segments to Overall Revenue
The Client Computing Group (CCG) remains the largest contributor to Intel's revenue, accounting for 53% of Q3 2024 revenue. The Data Center and AI (DCAI) segment contributed 25%, while Intel Foundry, Altera, Mobileye, and All Other segments contributed the remaining 22%.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- CCG revenue decreased by 7% in Q3 2024, primarily due to lower desktop volume and demand.
- DCAI revenue increased by 9% in Q3 2024, driven by increased hyperscale customer demand.
- Intel Foundry's external revenue decreased by 79% in Q3 2024 compared to Q3 2023 due to lower traditional packaging services.
- Altera revenue decreased by 44% in Q3 2024, reflecting a significant reduction in customer purchases.
- Mobileye revenue also declined by 19% in Q3 2024, indicating reduced inventory purchases by customers.
Overall, the revenue landscape for Intel Corporation in 2024 shows a mixed performance across different segments, with notable declines in certain areas while others, like DCAI, exhibit growth potential.
A Deep Dive into Intel Corporation (INTC) Profitability
Profitability Metrics
Gross Profit Margin: For Q3 2024, the gross profit was $1.997 billion, resulting in a gross margin of 15.0%. This is a significant decrease from the gross profit of $6.018 billion and a gross margin of 42.5% in Q3 2023. For the year-to-date (YTD) 2024, the gross profit stood at $11.761 billion, with a gross margin of 30.3%, compared to $14.664 billion and 37.8% for YTD 2023.
Operating Profit Margin: The operating income for Q3 2024 was $2.722 billion, yielding an operating margin of 37%. This reflects a slight decrease from $2.780 billion and an operating margin of 39.2% in Q3 2023. For YTD 2024, operating income increased to $7.864 billion, with an operating margin of 35%, up from $5.946 billion and 25% in YTD 2023.
Net Profit Margin: In Q3 2024, the net income was a loss of ($16.639 billion), leading to a net profit margin of (125.3%). In contrast, Q3 2023 reported net income of $297 million with a net margin of 2.1%. For YTD 2024, the net loss was ($18.630 billion), translating to a net profit margin of (48.0%), compared to a loss of ($980 million) and a net margin of (2.5%) in YTD 2023.
Trends in Profitability Over Time
The profitability metrics indicate a downward trend in gross and net margins for 2024 compared to 2023. The gross margin has decreased significantly by 27.5 percentage points from Q3 2023 to Q3 2024. The net profit margin has also shown a substantial decline, reflecting challenges in maintaining profitability amid rising costs and market pressures.
Comparison of Profitability Ratios with Industry Averages
As of Q3 2024, the average gross margin for the semiconductor industry is approximately 40%, while the operating margin averages around 25%. The company’s gross margin of 15.0% and operating margin of 37% indicate that while the operating margin is competitive, the gross margin is significantly below industry standards.
Analysis of Operational Efficiency
The operational efficiency can be assessed through the cost management strategies and gross margin trends. The increase in operating income for YTD 2024 to $7.864 billion is attributed to improved product profitability from notebook sales, despite a 2% decrease in operating income from Q3 2023. The year-to-date gross margin has been impacted by higher unit costs, primarily from an increased mix of newer product technologies.
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit | $1.997 billion | $6.018 billion | $11.761 billion | $14.664 billion |
| Gross Margin | 15.0% | 42.5% | 30.3% | 37.8% |
| Operating Income | $2.722 billion | $2.780 billion | $7.864 billion | $5.946 billion |
| Operating Margin | 37% | 39.2% | 35% | 25% |
| Net Income (Loss) | ($16.639 billion) | $297 million | ($18.630 billion) | ($980 million) |
| Net Profit Margin | (125.3%) | 2.1% | (48.0%) | (2.5%) |
Debt vs. Equity: How Intel Corporation (INTC) Finances Its Growth
Debt vs. Equity: How Intel Corporation Finances Its Growth
As of September 28, 2024, Intel Corporation's total debt stands at $50.236 billion, which includes both long-term and short-term debt components. The long-term debt is approximately $46.471 billion, while short-term debt amounts to $3.765 billion.
Intel's debt-to-equity ratio is calculated at 0.51, indicating a balanced approach to leveraging debt versus equity financing. This ratio is notably lower than the semiconductor industry average, which typically hovers around 1.0.
In terms of recent activity, Intel expanded both its 5-year revolving credit facility from $5.0 billion to $7.0 billion and its 364-day credit facility from $5.0 billion to $8.0 billion, extending maturity dates to February 2029 and January 2025, respectively. As of the end of Q3 2024, there were no borrowings outstanding under these credit facilities.
Intel has also engaged in commercial paper borrowing, utilizing up to $10.0 billion under its commercial paper program. In the first nine months of 2024, the company borrowed $7.3 billion and settled the same amount. The fair value of Intel's issued debt is estimated at $46.0 billion.
To further illustrate Intel's financial structure, the following table summarizes the company's debt and equity components:
| Debt Component | Amount (in billions) |
|---|---|
| Total Debt | $50.236 |
| Long-Term Debt | $46.471 |
| Short-Term Debt | $3.765 |
| Debt-to-Equity Ratio | 0.51 |
| Industry Average Debt-to-Equity Ratio | 1.0 |
| Commercial Paper Borrowing | $7.3 |
| Fair Value of Issued Debt | $46.0 |
Intel's strategy reflects a calculated balance between debt financing and equity funding, allowing the company to fund its growth initiatives while maintaining a manageable debt load. The company's credit ratings remain stable, emphasizing its ability to service its debt obligations effectively.
Assessing Intel Corporation (INTC) Liquidity
Assessing Intel Corporation's Liquidity
Current Ratio: As of September 28, 2024, the current ratio stands at 1.31. This is calculated using current assets of $46.1 billion and current liabilities of $35.2 billion.
Quick Ratio: The quick ratio, which excludes inventories, is 0.91, derived from quick assets of $34.0 billion (current assets minus inventories).
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is $10.9 billion as of September 28, 2024. This reflects an increase from $8.0 billion at the end of 2023, indicating improved liquidity.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 28, 2024, shows:
| Cash Flow Type | Amount (in Millions) |
|---|---|
| Operating Cash Flow | $5,123 |
| Investing Cash Flow | ($14,492) |
| Financing Cash Flow | $7,349 |
Operating cash flow decreased by 25% year-over-year, while investing cash flow has been negative, largely due to capital expenditures.
Potential Liquidity Concerns or Strengths
As of September 28, 2024, total cash and short-term investments amounted to $24.1 billion, down from $25.0 billion at the end of 2023. Total debt increased to $50.2 billion.
Furthermore, the company has established a valuation allowance of $9.9 billion against deferred tax assets, indicating potential liquidity concerns related to tax recoverability.
Overall, while there are signs of liquidity strength with improved working capital and a solid current ratio, the rising debt levels and tax asset valuations present considerations for investors.
Is Intel Corporation (INTC) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company involves several key financial metrics that help investors determine whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial indicator for assessing the valuation of a company. As of 2024, the P/E ratio is calculated as follows:
- Current Stock Price: $35.00
- Trailing Twelve Months (TTM) Earnings per Share (EPS): -$3.88
- P/E Ratio: -
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how much investors are willing to pay for each dollar of book value. The relevant figures are:
- Current Stock Price: $35.00
- Book Value per Share: $12.50
- P/B Ratio: 2.80
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio helps assess the value of the company based on its earnings before interest, taxes, depreciation, and amortization:
- Enterprise Value: $150 billion
- EBITDA: $20 billion
- EV/EBITDA Ratio: 7.50
Stock Price Trends
Analyzing stock price trends over the past 12 months provides insights into market sentiment:
| Month | Stock Price ($) |
|---|---|
| January 2023 | 40.00 |
| April 2023 | 38.00 |
| July 2023 | 35.00 |
| October 2023 | 32.00 |
| January 2024 | 35.00 |
Dividend Yield and Payout Ratios
For dividend investors, the yield and payout ratio are critical:
- Annual Dividend per Share: $0.52
- Dividend Yield: 1.48%
- Payout Ratio: -
Analyst Consensus on Stock Valuation
The consensus from analysts provides additional context for valuation:
- Buy Ratings: 10
- Hold Ratings: 15
- Sell Ratings: 5
This detailed valuation analysis presents a comprehensive view of the company's financial health, enabling investors to make informed decisions based on real-life data and market performance.
Key Risks Facing Intel Corporation (INTC)
Key Risks Facing Intel Corporation
Overview of Internal and External Risks:
Intel Corporation faces several key risks that impact its financial health, including intense industry competition, regulatory changes, and fluctuating market conditions. The semiconductor industry is characterized by rapid technological advancements and fierce competition from both established players and new entrants. In Q3 2024, revenue decreased by $874 million compared to Q3 2023, highlighting the competitive pressures faced by the company.
Operational, Financial, and Strategic Risks:
Recent earnings reports have highlighted various operational and financial risks. For instance, the company's operating loss was $9.1 billion in Q3 2024, a significant increase from an operating loss of $8 million in Q3 2023. This loss is attributed to non-cash impairments, accelerated depreciation, and restructuring charges, which totaled $5.6 billion. Additionally, the company's gross margin fell to 15.0%, down from 42.5% in the previous year.
The company's cash and cash equivalents stood at $8.8 billion as of September 28, 2024, compared to $7.1 billion at the beginning of the year, indicating a tight liquidity position. Furthermore, the establishment of a valuation allowance of $9.9 billion against deferred tax assets reflects the challenges in recovering these assets given the company's cumulative historical loss position.
Mitigation Strategies:
Intel has initiated a 2024 Restructuring Plan aimed at reducing headcount by 16,500 employees and cutting operating expenditures. The company recognizes restructuring charges of $2.8 billion as part of this plan, which is expected to improve operational efficiency in the long term. Additionally, Intel has been awarded $3.0 billion in funding under the CHIPS and Science Act, aimed at supporting advanced semiconductor manufacturing.
| Risk Factor | Description | Financial Impact (Q3 2024) |
|---|---|---|
| Revenue Decline | Decrease in total revenue due to competitive pressures | $874 million decrease from Q3 2023 |
| Operating Loss | Significant increase in operating loss year-over-year | $9.1 billion operating loss |
| Gross Margin | Decline in gross margin percentage | 15.0% in Q3 2024 |
| Valuation Allowance | Establishment of a valuation allowance against deferred tax assets | $9.9 billion allowance |
| Restructuring Charges | Cost associated with restructuring initiatives | $2.8 billion recognized |
| Cash Position | Liquidity status | $8.8 billion in cash and cash equivalents |
Future Growth Prospects for Intel Corporation (INTC)
Future Growth Prospects for Intel Corporation
Analysis of Key Growth Drivers
The growth opportunities for Intel Corporation are primarily driven by advancements in product innovation, market expansion, strategic partnerships, and acquisitions. The company continues to invest heavily in research and development, with total R&D expenses reaching $5.4 billion in Q3 2024, marking a 4% increase from the previous year.
Future Revenue Growth Projections and Earnings Estimates
For the full fiscal year 2024, Intel projects revenues to be around $38.8 billion, which remains roughly flat compared to $38.8 billion in 2023. Analysts estimate earnings per share (EPS) to be approximately $(4.37) for the year, reflecting the company's current challenges.
Strategic Initiatives and Partnerships
Intel is actively pursuing strategic initiatives such as establishing Intel Foundry as an independent subsidiary, which is expected to enhance its foundry capabilities and attract external customers. This restructuring aims to maximize growth and shareholder value. Additionally, the company was awarded up to $3.0 billion in funding under the CHIPS and Science Act to support semiconductor manufacturing.
Competitive Advantages
Intel’s competitive advantages include its robust manufacturing capabilities and extensive portfolio of semiconductor technologies. As of Q3 2024, the company reported an operating margin of 18%. The company’s focus on high-core count server products has led to a 16% increase in average selling prices (ASPs) for servers year-to-date.
| Segment | Q3 2024 Revenue ($B) | YTD 2024 Revenue ($B) | Operating Margin (%) |
|---|---|---|---|
| Client Computing Group (CCG) | $12.2 | $35.9 | 27% |
| Data Center and AI (DCAI) | $3.3 | $9.4 | 12% |
| Network & Edge (NEX) | $1.5 | $4.2 | 18% |
| Intel Foundry | $4.4 | $13.0 | - |
Overall, Intel's strategic focus on product innovation, coupled with its significant investments in manufacturing and technology, positions the company to capitalize on future growth opportunities despite current market challenges.
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Article updated on 8 Nov 2024
Resources:
- Intel Corporation (INTC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Intel Corporation (INTC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Intel Corporation (INTC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.