By Arsheeya Bajwa and Max A. Cherney
Jan 25 (Reuters) - Intel INTC.O on Thursday forecast revenue for the first quarter that could miss market estimates by more than $2 billion, as it grapples with uncertain demand for its chips used in the traditional server and personal computer markets.
Shares of the Santa Clara, California-based company were down about 6% in after-hours trading.
The chipmaker expects adjusted first-quarter revenue in the range of $12.2 billion-$13.2 billion, compared with analysts' average estimate of $14.50 billion, according to LSEG data. Intel forecast first-quarter profit of 13 cents a share, excluding one-time items. Analysts expected 33 cents a share. It was not immediately clear if the numbers were comparable.
Heavy investments have toppled Intel's gross margin, which fell to the mid-30s earlier in 2023, from prior highs of over 60%. Intel, however, mildly recouped with an adjusted gross margin of 45.8% in the third quarter. Intel reported a fourth-quarter gross margin of 48.8%.
Analysts have proclaimed 2024 as a "make-or-break" period for Intel. They believe 2024 will be the year that determines whether Intel actually stands to gain from the rollout of much- coveted artificial-intelligence PCs and its AI-enabling chips.
A shift in spending to AI data servers, dominated by rivals Nvidia NVDA.O and aspiring AI competitor Advanced Micro Devices AMD.O has sapped demand for traditional server chips - Intel's core data center offering. Intel's fourth-quarter data center revenue fell 10% to $4 billion.
Intel is one of the largest suppliers of PC chips by market share. Its weak forecast dampens hopes of the PC market recovering after some signs that the post-pandemic slump was over. Revenue in the client segment, which houses Intel's PC business, gained 33% to $8.8 billion during the quarter.
During the fourth quarter, shipments of PCs declined year-on-year for the eighth consecutive quarter, according to data from research firm Counterpoint.
Intel's self-driving technology unit, Mobileye MBLY.O, reported fourth-quarter revenue below estimates after warning of a pullback in orders from customers clearing inventory hurting its results this year.
Intel, which was once at the helm of the semiconductor industry as a leading chipmaker, has slumped in recent years. Under CEO Pat Gelsinger, turnaround efforts have amounted to a renewed focus on building manufacturing capabilities and advancing its semiconductor technology.
(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco Additional reporting by Stephen Nellis in San Francisco Editing by Sriraj Kalluvila, Sayantani Ghosh and Matthew Lewis)
((ArsheeyaSingh.Bajwa@thomsonreuters.com; +91 8510015800;))
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