Intel's Q4 2024: Unpacking Contradictions in Margins, Manufacturing, and AI Strategy

These are the key contradictions discussed in Intel's latest 2024 Q4 earnings call, specifically including: Gross Margin Expectations and the Impact of AIPC, the Role of External Manufacturing in Data Center Products, Strategic Direction and Capital Deployment, and Expectations for AI Data Center Solutions:



Revenue and Segment Performance:
- Intel Corporation reported revenue of $13 billion for Intel Products in Q4, up 7% sequentially.
- The growth was driven by increased client edge and traditional data center sales, despite ongoing PC inventory normalization.
- Intel Foundry's revenue reached $4.5 billion, up 3% sequentially, due to increased EUV wafer mix and higher equipment sales.

Gross Margin and Earnings:
- Non-GAAP gross margin for Q4 was 42.1%, exceeding the guidance by 260 basis points.
- The improvement was due to higher revenue, better cost management, and receipt of CHIPs grants, partially offset by inventory reserves.
- Q4 earnings per share were $0.13, surpassing the guidance of $0.12, attributed to cost savings and revenue growth.

Intel Foundry Strategy and Financials:
- Intel is focused on delivering break-even operating income for Intel Foundry by the end of 2027.
- The company aims to improve financials through increased EUV wafer mix, process efficiency, and strategic supplier engagement.
- Intel Foundry's operating loss in Q4 improved to $2.3 billion, reflecting a $3.1 billion decrease in impairments.

Data Center and AI Market Strategy:
- Intel Products is focused on stabilizing data center market share in 2025 through new product launches and engagements with the x86 ecosystem.
- The AI data center market is an area of opportunity, with Intel planning to leverage its expertise to develop a system-level solution with Jaguar Shores.
- The strategy is driven by a need to lower the cost and increase efficiency of compute in AI, leveraging Intel's core assets.