Intel has posted stronger-than-expected fourth quarter (Q4) results for 2024, but its outlook for the first quarter of 2025 (Q1 2025) fell short of market expectations. The semiconductor giant continues to face declining demand for its data centre processors and struggles to capitalise on the growing market for AI chips.
Its Q4 revenue stood at $14.3bn, representing a 7% decline year-over-year (YoY). However, the figure surpassed analysts’ projections of $13.81bn. The company reported a net loss of $126m compared to a net income of $2.67bn in the corresponding quarter of the prior year. For the full year 2024, Intel reported revenue of $53.1bn, down 2% YoY.
Despite beating expectations in the latest quarter, Intel’s guidance for Q1 2025 disappointed investors. The company projects revenue between $11.7bn and $12.7bn, falling short of the consensus estimate of $12.87bn. It also expects to break even on an adjusted per-share basis, while analysts had forecast an adjusted profit of $0.09 per share.
Market reaction and competitive pressures
Following the earnings report, Intel’s stock rose nearly 4% in after-hours trading. However, concerns remain over the company’s ability to regain market share in key segments. Over the past year, Intel’s stock has declined by approximately 60%, as it struggles to compete with rivals such as Nvidia and AMD. The Santa Clara, California-based company has been losing ground in both the PC and server processor markets, with AMD continuing to gain market share. The global PC market, which accounts for a significant portion of Intel’s revenue, saw only modest growth last year, underperforming expectations of a strong rebound.
Meanwhile, the demand for AI-specific chips has surged, benefiting companies like Nvidia, while traditional server processors, including Intel’s offerings, have seen reduced demand. Intel previously projected that its Gaudi AI chips would generate over $500m in sales in 2024 but later withdrew that forecast, signalling weaker-than-expected competitiveness in the AI sector.
Intel is not the only semiconductor company facing challenges in the AI market. Samsung Electronics has also warned of sluggish AI chip sales in the current quarter, citing US export restrictions to China and ongoing efforts to develop an improved version of its high-end chips.
AI chips have been a rare growth area within the otherwise weak memory chip sector. However, while demand for high-bandwidth memory (HBM) chips used in AI processing has surged, Samsung has struggled to meet Nvidia’s performance requirements. Instead, rival SK hynix has established itself as Nvidia’s primary supplier of HBM chips, further consolidating its position in the AI semiconductor supply chain.
Intel is undergoing a leadership transition following the departure of former CEO Pat Gelsinger last month. The company is currently led by interim co-CEOs Michelle Johnston Holthaus and David Zinsner, while the search for a permanent chief executive is still underway. The lack of clarity on long-term leadership has added to investor uncertainty about Intel’s future strategy.
On a conference call with analysts, Holthaus announced that Intel would not proceed with commercial production of its Falcon Shores GPU, an AI-focused chip that was expected to compete with Nvidia’s offerings. Instead, Falcon Shores will be used as an internal test chip, while Intel focuses on new data centre AI products under the codename Jaguar Shores. Intel’s challenges in the AI space are further complicated by increasing competition, not only from Nvidia and AMD but also from emerging players such as DeepSeek, a Chinese AI company. DeepSeek has quickly gained traction with AI models marketed as cost-effective alternatives to US offerings.
Intel attributed its softer first-quarter forecast to seasonal demand fluctuations, economic uncertainties, and potential tariffs. According to Zinsner, some customers may have increased purchases in the fourth quarter to avoid potential tariff-related cost increases, contributing to the revenue decline expected in early 2025. “We are fostering a culture of efficiency across the business while driving toward greater returns on our invested capital and improved profitability,” said Zinsner.
The company is also in the midst of a significant transition towards becoming a contract manufacturer for other semiconductor firms. This strategy has raised concerns about its impact on Intel’s cash flow. Intel’s foundry business reported revenue of $4.5bn in the quarter, exceeding estimates. Intel expects volume production of chips based on its 18A process technology to commence in the second half of 2025. Additionally, it plans to introduce its next-generation Panther Lake laptop chips later this year.
Read more: Intel considers spinning off production unit after CEO departure and AI setbacks
