Intel(US:INTC) Huachuang Securities·2024-08-07 10:01Investment Rating - The report does not explicitly provide an investment rating for Intel (INTC) [1][2][3] Core Views - Intel's Q2 2024 revenue was $12.83 billion (YoY -1%, QoQ +1%), below market expectations of $12.98 billion [5] - Non-GAAP gross margin was 38.7% (YoY -1.1pct, QoQ -6.4pct), and Non-GAAP EPS was $0.02, significantly below the market expectation of $0.10 [5] - The company's profitability was impacted by higher costs related to AI PC production, unfavorable product mix, and increased price competition [6] - Intel plans to cut costs by over $10 billion by 2025, including reducing headcount by more than 15% [8][9] - The company expects Q3 2024 revenue to be between $12.5 billion and $13.5 billion, below the market expectation of $14.38 billion [21] Business Segments Summary Intel Product Business - Revenue for Intel's product business in Q2 2024 was $11.8 billion, up 4% YoY, with an operating profit of $2.9 billion, up 16% YoY [10] - Client Computing Group (CCG) revenue was $7.41 billion (YoY +9%, QoQ -1%), driven by AI PC growth, partially offset by export restrictions in China [11] - Data Center and AI Group (DCAI) revenue was $3.05 billion, down 3% YoY, with expectations of sequential growth in H2 2024 due to improved demand for traditional servers [12] - Network and Edge Group (NEX) revenue was $1.34 billion, down 1% YoY, with stable performance and 10% YoY growth in H1 2024 [14] Intel Foundry Business - Foundry revenue in Q2 2024 was $4.32 billion (YoY +4%, QoQ -1%), driven by Intel 7, Intel 4, and Intel 3 wafer shipments [15] - Foundry operating loss was $2.8 billion (YoY -47%, QoQ -12%), with continued pressure expected in Q3 due to high costs from pre-EUV nodes [15] - Intel is progressing with its "4 nodes in 5 years" strategy, with Intel 18A expected to be ready for production by the end of 2024 [17] Other Businesses - Mobileye revenue was $440 million (YoY -3%, QoQ +84%), with an operating margin of 16.4%, but the company lowered its H2 2024 revenue and profit guidance due to challenges in China [18] - Altera revenue was $361 million (YoY -57%, QoQ +6%), with an operating margin of -6.9%, but the company expects double-digit sequential revenue growth in H2 2024 [20] Cost-Cutting and Strategic Plans - Intel plans to reduce operating expenses to $20 billion in 2024 and $17.5 billion in 2025, with a focus on streamlining operations and reducing headcount [9] - Capital expenditure for 2024 is expected to be between $25 billion and $27 billion, down more than 20% from initial guidance, reflecting weaker demand expectations [9] - The company will suspend dividends starting from Q4 2024 to prioritize liquidity for strategic investments [9] Future Outlook - Intel expects to achieve positive adjusted free cash flow by 2025, driven by cost reductions and improved capital efficiency [24] - The company is optimistic about its long-term strategy, including the transition to Intel 18A and the growth of AI PC and data center markets [25][26] - Intel aims to achieve a 60% gross margin and 40% operating margin by the end of the decade, supported by its new operating model and cost discipline [34]