Intel Q3 2024 Earnings: DCAI Saves The Day

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

Intel has now announced its earnings for the third quarter of 2024, posting broadly encouraging results relative to Wall Street's consensus expectations.

Intel (NASDAQ: INTC) Earnings Release For The Third Quarter of 2024

For the three months that ended on the 30th of September, Intel reported $13.284 billion in non-GAAP revenue, beating consensus expectations of $13.04 billion.

Here is the actual performance of Intel's business segments in Q3 2024:

The following chart compares the performance of Intel's two major segments - Data Center and AI (DCAI) and Client Computing Group (CCG) - with Wall Street's consensus expectations (sourced from here and here).

Intel has been trying to tap the thematic AI tailwind by collaborating with IBM to deploy its bespoke Gaudi 3 AI accelerators as a service within IBM Cloud. This initiative aims to attract companies that are seeking to scale their AI workloads in a cost-effective manner. Moreover, Intel is bringing AI capabilities to personal computers (PCs) via its core ultra processors that now support around 100 software vendors and 300 AI models.

Given the fact that Intel's DCAI segment has beaten Wall Street's consensus revenue expectations in Q3 2024, it seems the company is finally seeing dividends from the secular AI-focused tailwind.

During the quarter, the company generated $4.1 billion in cash from its operations. Its cash and cash equivalents and short-term investments now stand at around $24 billion.

Intel has reported Q3 2024 non-GAAP gross margin of 18 percent, which is down 27.8 points on an annual basis. Bear in mind that Intel had guided to a non-GAAP gross margin of 38 percent while reporting its earnings for Q2 2024.

Finally, Intel earned -$0.46 in EPS (non-GAAP), missing consensus expectations of -$0.03.

Here is the company's guidance for the fourth quarter of 2024:

Intel Guidance

Investors have reacted positively to the company's latest earnings release, with the stock currently up around 12 percent in after-hours trading. The strength in DCAI segment has effectively countered weakness in Intel's gross margin, which is largely a function of $3.1 billion in restructuring charges that were incorporated into the cost of sales. The stock is also benefiting from a relatively upbeat guidance.

Intel CEO tells me the chip maker is "not going to achieve" its prior guidance of $500 million AI-accelerator revenue this year.

He also said Intel has not received any Chips Act disbursement from the U.S. government yet. “I’m frustrated that’s it’s been so slow to move…

— tae kim (@firstadopter) October 31, 2024

In an earnings call admission that has removed some of the initial euphoria around the stock, Intel's CEO Pat Gelsinger conceded that the uptake of the AI accelerator Gaudi 3 was "slower than expected" and, therefore, the chipmaker will miss its $500 Million initial target for AI Accelerators. Elsewhere, Intel is now slashing its headcount by 16,500, which is an increase from the previous target of ~15,000.

Of course, as we reported recently, Amazon has now emerged as the anchor customer for Intel's chip fabrication ambitions. In the first phase of their planned collaboration, the chipmaker will leverage its "Intel 3" process to build a custom Xeon 6 chip for Amazon's data center workloads. In the second phase, Intel will produce an "AI fabric chip" for Amazon's AWS on its 18A manufacturing process, which is compatible with TSMC's 2nm process and is expected to enter the commercial phase in 2025.

Meanwhile, Intel is still waiting for the Biden Administration to start releasing the grants and loans that were promised under the CHIPS Act.

Follow Wccftech on Google to get more of our news coverage in your feeds.