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Intel (INTC) stock fell as much as 5% after the bell Thursday as its first quarter financial outlook fell short of Wall Street’s expectations.
The chipmaker said it expects first quarter revenue of $12.2 billion, at the midpoint of its range and below the $12.6 billion projected by Wall Street analysts tracked by Bloomberg. Intel guided for earnings per share of $0 for the period, short of the estimated $0.08.
Meanwhile, Intel reported better-than-feared fourth quarter earnings and revenue as CEO Lip-Bu Tan nodded to rising AI demand for its chips called CPUs (central processing units).
Intel’s earnings per share of $0.15 for the period were slightly above the previous year’s $0.13 and ahead of the $0.09 projected, per Bloomberg data. The chipmaker’s fourth quarter revenue of $13.7 billion marked a 4% decline from the year-ago period but was higher than the $13.4 billion expected.
“Our conviction in the essential role of CPUs in the AI era continues to grow,” Tan said in a statement. “Our priorities are clear: sharpen execution, reinvigorate engineering excellence, and fully capitalize on the vast opportunity AI presents across all of our businesses.”
The company — the only large-scale, leading-edge US chip manufacturer backed by the federal government and Nvidia (NVDA) — has faced mounting competition from AMD (AMD) and Arm (ARM) in its product business, adding to pressure on Intel as its manufacturing division strives to recover from years of setbacks.
Its fourth quarter report comes amid burgeoning Wall Street optimism over the company’s long-awaited turnaround. Rising demand for Intel’s traditional computing chips, or CPUs, from data centers and the launch of Intel’s Panther Lake chips for AI PCs prompted multiple investing firms, including HSBC and KeyBanc, to raise their ratings on Intel stock in the last few weeks. The moves boosted shares this month, with the stock rising nearly 12% to hit its highest level in four years on Wednesday alone.
Read more: Live coverage of corporate earnings
One challenge Intel faces in the near term is the hefty cost of developing 18A and upcoming manufacturing process nodes, which are set to weigh on gross margins. Although Intel’s adjusted gross margin of 37.9% in the fourth quarter marked a decline from 42.1% last year, it was above the 36.5% estimated.
Another concern is that rising costs for memory and storage components used alongside Intel’s CPUs in data center servers and PCs could weigh on demand for systems built with Intel processors and hurt the chipmaker’s bottom line.