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Intel (INTC) Q3 Earnings Top Estimates, Revenues Decline Y/Y
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Intel Corporation (INTC - Free Report) reported better-than-expected third-quarter 2023 results, largely due to strong operating leverage, expense discipline and significant traction from its IDM 2.0 (integrated device manufacturing) strategy.
Quarter Details
The company reported GAAP earnings of $297 million or 7 cents per share compared with $1,019 million or 25 cents per share in the year-ago quarter. The significant decline was primarily attributable to top-line contraction and higher income tax benefits in the prior year.
Non-GAAP earnings in the reported quarter were $1,739 million or 41 cents per share compared with $1,526 million or 37 cents per share a year ago. The bottom line beat the Zacks Consensus Estimate by 20 cents.
Intel Corporation Price, Consensus and EPS Surprise
GAAP revenues in the reported quarter were $14,158 million, down 7.7% year over year. Despite the year-over-year decline, quarterly revenues were well above the high end of the guided range, with better-than-expected performance across all lines of business. The top line beat the consensus estimate of $13,495 million.
Segment Performance
By segments, Client Computing Group (CCG, 55.6% of total revenues) revenues were down 3.2% year over year to $7,867 million. This was primarily due to global TAM (total addressable market) contraction, partially offset by stabilizing OEM inventory levels. However, it exceeded management expectations and was well above our estimates of $6,728 million. The company expects 2023 PC consumption to be approximately 270 million units, with customers largely completing their inventory burn in the first half of the year.
Datacenter and AI Group (DCAI, 26.9%) revenues fell 10.4% year over year to $3,814 million. This was due to lower CPU TAM and competitive pressures. Intel witnessed TAM contraction across all CPU market segments. It also missed our estimates of $4,211 million. The company has a singular focus on regaining performance and TCO leadership across all workloads and use cases from enterprise to cloud, as the business is expected to return to normal demand levels.
Network and Edge Group (NEX, 10.2%) revenues declined 32% to $1,450 million as elevated inventory levels and soft demand trends with sluggish recovery in China affected segment sales. Various firms have also delayed infrastructure investments owing to macroeconomic uncertainty. The segment revenues fell short of our estimates of $1,637 million.
Mobileye (3.7%) revenues improved 17.8% to $530 million, primarily driven by higher demand for EyeQ products. Intel Foundry Services (IFS, 2.2%) revenues were $311 million, up 298.7% on increased packaging revenues and higher sales of IMS Nanofabrication tools, while All Other (1.3%) revenues were $186 million, falling 36.7% year over year.
Other Operating Details
Non-GAAP gross margin was relatively flat at 45.8%, while non-GAAP operating margin improved from 10.8% to 13.6%.
CCG's operating income was up 43.3% year over year to $2,073 million on lower inventory reserves and cost discipline, while DCAI's operating income was $71 million – up from an operating loss of $139 million a year ago, primarily due to cost discipline. NEX's operating profit was $17 million compared with $197 million on lower revenues, while that from Mobileye was up 19.7% to $170 million on higher revenues.
Cash Flow & Liquidity
As of Sep 30, 2023, Intel had cash and cash equivalents of $7,621 million, with $46,591 million of long-term debt. During the first nine months of 2023, Intel generated $6,847 million of cash from operating activities compared with $7,730 million in the year-ago period.
Outlook
For the fourth quarter of 2023, Intel offered bullish guidance and currently expects non-GAAP revenues to be $14.6-$15.6 billion. Non-GAAP gross margin is likely to be 46.5%. Non-GAAP earnings are expected to be around 44 cents per share.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2, is another key pick from the broader industry. It delivered an earnings surprise of 372.9%, on average, in the trailing four quarters.
Headquartered in Raleigh, NC, Bandwidth operates as a Communications Platform-as-a-Service provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
United States Cellular Corporation (USM - Free Report) , carrying a Zacks Rank #2, is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services, and a high-quality network to increase the competitiveness of local businesses and improve efficiency of government operations.
U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology. The company is well-positioned for continued demand for broadband.
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Intel (INTC) Q3 Earnings Top Estimates, Revenues Decline Y/Y
Intel Corporation (INTC - Free Report) reported better-than-expected third-quarter 2023 results, largely due to strong operating leverage, expense discipline and significant traction from its IDM 2.0 (integrated device manufacturing) strategy.
Quarter Details
The company reported GAAP earnings of $297 million or 7 cents per share compared with $1,019 million or 25 cents per share in the year-ago quarter. The significant decline was primarily attributable to top-line contraction and higher income tax benefits in the prior year.
Non-GAAP earnings in the reported quarter were $1,739 million or 41 cents per share compared with $1,526 million or 37 cents per share a year ago. The bottom line beat the Zacks Consensus Estimate by 20 cents.
Intel Corporation Price, Consensus and EPS Surprise
Intel Corporation price-consensus-eps-surprise-chart | Intel Corporation Quote
GAAP revenues in the reported quarter were $14,158 million, down 7.7% year over year. Despite the year-over-year decline, quarterly revenues were well above the high end of the guided range, with better-than-expected performance across all lines of business. The top line beat the consensus estimate of $13,495 million.
Segment Performance
By segments, Client Computing Group (CCG, 55.6% of total revenues) revenues were down 3.2% year over year to $7,867 million. This was primarily due to global TAM (total addressable market) contraction, partially offset by stabilizing OEM inventory levels. However, it exceeded management expectations and was well above our estimates of $6,728 million. The company expects 2023 PC consumption to be approximately 270 million units, with customers largely completing their inventory burn in the first half of the year.
Datacenter and AI Group (DCAI, 26.9%) revenues fell 10.4% year over year to $3,814 million. This was due to lower CPU TAM and competitive pressures. Intel witnessed TAM contraction across all CPU market segments. It also missed our estimates of $4,211 million. The company has a singular focus on regaining performance and TCO leadership across all workloads and use cases from enterprise to cloud, as the business is expected to return to normal demand levels.
Network and Edge Group (NEX, 10.2%) revenues declined 32% to $1,450 million as elevated inventory levels and soft demand trends with sluggish recovery in China affected segment sales. Various firms have also delayed infrastructure investments owing to macroeconomic uncertainty. The segment revenues fell short of our estimates of $1,637 million.
Mobileye (3.7%) revenues improved 17.8% to $530 million, primarily driven by higher demand for EyeQ products. Intel Foundry Services (IFS, 2.2%) revenues were $311 million, up 298.7% on increased packaging revenues and higher sales of IMS Nanofabrication tools, while All Other (1.3%) revenues were $186 million, falling 36.7% year over year.
Other Operating Details
Non-GAAP gross margin was relatively flat at 45.8%, while non-GAAP operating margin improved from 10.8% to 13.6%.
CCG's operating income was up 43.3% year over year to $2,073 million on lower inventory reserves and cost discipline, while DCAI's operating income was $71 million – up from an operating loss of $139 million a year ago, primarily due to cost discipline. NEX's operating profit was $17 million compared with $197 million on lower revenues, while that from Mobileye was up 19.7% to $170 million on higher revenues.
Cash Flow & Liquidity
As of Sep 30, 2023, Intel had cash and cash equivalents of $7,621 million, with $46,591 million of long-term debt. During the first nine months of 2023, Intel generated $6,847 million of cash from operating activities compared with $7,730 million in the year-ago period.
Outlook
For the fourth quarter of 2023, Intel offered bullish guidance and currently expects non-GAAP revenues to be $14.6-$15.6 billion. Non-GAAP gross margin is likely to be 46.5%. Non-GAAP earnings are expected to be around 44 cents per share.
Zacks Rank & Other Stocks to Consider
Intel currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2, is another key pick from the broader industry. It delivered an earnings surprise of 372.9%, on average, in the trailing four quarters.
Headquartered in Raleigh, NC, Bandwidth operates as a Communications Platform-as-a-Service provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
United States Cellular Corporation (USM - Free Report) , carrying a Zacks Rank #2, is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services, and a high-quality network to increase the competitiveness of local businesses and improve efficiency of government operations.
U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology. The company is well-positioned for continued demand for broadband.