Intel’s (NASDAQ:INTC) fourth-quarter earnings report could have sent shares even lower. After the report, shares fell nearly 10% but when markets opened on January 25, the drop of 5.47% was less severe.
What happened?
Revenue growth in Q4 was muted, up just 9% to $18.7 billion and below management’s expectations. Weakening modem demand and slower growth in China hurt quarterly results. Weakening NAND pricing, which Micron (NASDAQ: MU) and Samsung (NYSE:SSNLF) both already stated, plus excess capacity in cloud services hurt sales.
Optimism for Upside
Management mentioned AI, autonomous driving and 5G as current growth drivers. Still, 5G orders will not start until the middle of this year and ADAS does not make up much of the total revenue. Intel is still very much tied to the PC market.
In the PC space, Intel is readying production for Lakefield this year. This technology features a 10 nanometer hybrid CPU architecture. By having both a Sunny Clove CPU and four low-power Atom CPUs, and 11th generation graphics, Intel will further shrink the PC motherboard.
While 10 nanometer developments will weight on costs and growth, Intel will still maintain its operating margin of 35%. This will not increase in the near-term. Still, the company is shareholder friendly. It returned $15.3 billion back to shareholders, paid out $5.5 billion worth of dividends and generated $14.3 billion in free cash flow.
Intel’s growth may be in the single digits but it will suit conservative investors.
