Intel Isn't Sweating Its Soft Outlook, Says Demand For Core Ultra-Powered AI PCs Is Hot

The results are in for Intel's first quarter earnings and while investors sent the stock sliding in after hours trading on a soft Q3 outlook, the chip maker remains confident in its position. We'll get to that in a moment, but first let's discuss how Intel fared in the first quarter, both overall and among its individual business divisions.

Intel's overall revenue reached $12.7 billion for the first quarter of 2024, which is up 9% from the same quarter a year ago. This was enough to slash its net loss for the quarter to $381 million, down from an historic $2.56 billion net loss in the first quarter of 2023. Despite the quarterly loss, Intel CEO Pat Gelsinger says the company is "making steady progress" on its priorities and "delivered a solid quarter."

"Strong innovation across our client, edge and data center portfolios drove double-digit revenue growth in Intel Products. With Intel 3 in high-volume production, leading-edge semiconductors are being manufactured in the U.S. for the first time in almost a decade and we are on track to regain process leadership next year as we grow Intel Foundry. We are confident in our plans to drive sequential growth throughout the year as we accelerate our AI solutions and maintain our relentless focus on execution, operational discipline and shareholder value creation in a dynamic market," Gelsinger said in a statement.

Likewise, Intel CFO David Zinsner said the company's first quarter revenue "was in line our expectations." Zinsner also praised Intel's new financial reporting structure for its foundry operating model in an effort to be more transparent, saying it's "already driving better decision-making across the business."

Breaking things down by division, Intel's Client Computing Group (CCG) raked in $7.5 billion, which is a sizable 31% year-over-year increase. Meanwhile, its Data Center and AI (DCAI) division grew 3% year-over-yer to $3 billion. Intel Foundry, however, slid 10% to $4.4 billion, and Intel saw some big drops in a few other categories, including Altera (down 58% to $342 million) and Mobileye (down 48% to $239 million).

Intel shared a flat outlook for the second quarter of 2024, in which it anticipates between $12.5 billion to $13.5 billion, coming up short of Wall Street's expectations. As a result, shares of Intel slipped by as much as 9% in after market hours, though it's starting to climb back up in early pre-market hours this morning.

While the immediate outlook might be softer than some were hoping for, Intel isn't as concerned. 'Three' is the key number—that's how many times Gelsinger used the word 'hot' to describe demand for its Core Ultra processors based on Meteor Lake and AI PCs.

"As we go into the second half of the year, we're engaging deeply with our customers today, our OEM partners, and we just see strength across the board, right? Part of that is driven by our unique product position, some of it driven by the market characteristics and client, AI PC, and a second half Windows upgrade cycle, we believe, underway and Core Ultra is hot," Gelsinger said.

Later on during the call while talking about Gaudi 3 and 2, Gelsinger said, "AI is a hot market, and we're participating across all of our segments."

Then towards the end of the call, he addressed a question a question about supply constraints in terms of AI PCs, to which he said, "this is a hot product. The AI PC category, and we declared this as we finished last year, and we've just been incrementing up our AIPC or the Core Ultra product volumes throughout."

It's also an emerging category. Intel and AMD have both rolled out cutting-edge processors with integrated neural processing units (NPUs) to accelerate AI workloads, and of course NVIDIA has dug its heels into the AI category. Despite the current quarterly loss that Intel reported, it will be interesting to see where these three juggernauts end up by the end of the year.