Intel(US:INTC)2023-01-26 23:36Financial Data and Key Metrics Changes - Q4 revenue was $14 billion, down 8% sequentially and at the low end of guidance, with FY 2022 revenue totaling $63.1 billion [29][30] - Gross margin for Q4 was 44%, impacted by factory underload charges, with EPS at $0.10, below guidance due to lower revenue and increased inventory reserves [30][31] - Operating cash flow for Q4 was $7.7 billion, with adjusted free cash flow at $3.1 billion [30] Business Line Data and Key Metrics Changes - Client Computing Group (CCG) revenue was $6.6 billion, down 36% year-over-year, with elevated customer inventory expected to continue into H1 2023 [33] - Data Center and AI (DCAI) revenue was $4.3 billion, down 33% year-over-year, with operating profit of $371 million [33][34] - Programmable Solutions Group (PSG) achieved record Q4 revenue, up 42% year-over-year, while Network and Edge (NEX) revenue was $2.1 billion, down 1% year-over-year [34][35] - Mobileye revenue increased by almost 60% year-over-year in Q4, reaching $565 million [23][35] Market Data and Key Metrics Changes - The PC market is expected to see a total addressable market (TAM) of 270 million to 295 million units for 2023, with a likely outcome at the lower end due to demand uncertainty [9][10] - Server consumption TAM is expected to decline year-on-year in the first half of 2023 before returning to growth in the second half [11][12] - Broad-based markets like industrial and automotive showed strong demand, with expectations for continued growth in 2023 despite macro volatility [12] Company Strategy and Development Direction - The company is focused on executing $3 billion in cost savings for 2023 while maintaining critical long-term investments [13][36] - A shift towards an internal foundry model is expected to enhance operational efficiency and transparency, with a goal of achieving $8 billion to $10 billion in cost savings by 2025 [24][25] - The company aims to regain leadership in process technology by 2025, with significant product launches planned for 2023 and 2024 [26][27] Management's Comments on Operating Environment and Future Outlook - Management expects macroeconomic challenges to persist through at least the first half of 2023, with potential improvements in the second half [8][29] - The company is optimistic about long-term demand for PCs, citing strong usage data and an installed base that is 10% higher than pre-COVID levels [10][54] - Management emphasized the importance of rebuilding customer confidence and the strategic roadmap to regain market share in the data center segment [57][58] Other Important Information - An accounting change effective January 2023 will increase the estimated useful life of certain production machinery, expected to reduce total depreciation expense by approximately $4.2 billion in 2023 [37][38] - The company is committed to maintaining a competitive dividend, with a $0.365 dividend announced for Q1 [80] Q&A Session Summary Question: Will Q1 be the bottom for revenue? - Management expects most business units to decline sequentially, with Q1 seeing significant inventory corrections impacting outlook [45][46] Question: What will it take to return to a gross margin of 51% to 53%? - Revenue recovery and improved loading rates are essential, with ongoing initiatives to enhance gross margins [47][50] Question: How many weeks of PC microprocessor inventory are in the channel? - Management indicated that the consumption rate in Q4 was below expectations, with a significant inventory adjustment expected in Q1 [52][53] Question: What is the edge Intel has to change the share shift in cloud servers? - The introduction of high-quality products like Sapphire Rapids is expected to rebuild customer confidence and regain market share [56][57] Question: How is the demand environment in DCAI? - Demand has softened across all segments, with expectations for recovery in the second half of the year [86][88] Question: What is the strategy for capital expenditures in a slower demand environment? - The company is focused on strategic investments for long-term leadership while adjusting capacity capital to current demand [71][72]