To The Moon

Yesterday after the market closed, Intel $Intel(INTC)$ released its second-quarter financial report, and both revenue and profits exceeded analysts' expectations, causing the stock price to surge by 8% after hours.

In terms of revenue, the second-quarter revenue reached $12.95 billion, a year-on-year decrease of 15.5%, surpassing analysts' expectations of $12 billion. It can be said that it greatly exceeded expectations.

Intel's revenue is mainly divided into six categories, with the highest proportion coming from the traditional client business. In the second quarter, revenue from this segment was $6.78 billion, a year-on-year decrease of 11.7%, better than analysts' expectations of $6.1 billion. The next is the data center business, with second-quarter revenue of $4 billion, a year-on-year decrease of 14.7%, higher than analysts' expectations of $3.82 billion. Network & Edge revenue was $1.36 billion, estimated at $1.57 billion, a year-on-year decrease of 38.3%. Mobileye, the autonomous driving business, generated $454 million in revenue, a decrease of 1.3% year on year. Intel's foundry services revenue was $232 million, estimated at $152 million, showing an explosive increase of 307% year on year.

In terms of growth rates for each business segment, the decline in Intel's core client computing segment narrowed significantly, mainly due to PC manufacturers nearing the end of their destocking phase. According to data released by Gartner, global PC shipments in the second quarter of this year were 59.65 million units, a year-on-year decrease of 17%, but a sequential increase of 8%, indicating a turning point.

According to management's guidance, the PC market is expected to continue to recover in the second half of the year.

Intel's second-largest business segment, the data center, continued to narrow its decline this quarter, with a drop of 14.7%, much better than the more than 35% decline in the previous two quarters. With the driving force of AI, this business is expected to continue to recover.

The Network & Edge business saw a larger decline in the second quarter, but due to its smaller revenue scale, it had little impact on Intel. A similar deterioration was observed in the autonomous driving Mobileye business, but the management expects business growth to recover in the second half of the year.

The foundry business showed the largest increase this quarter, reaching an impressive 307%, mainly due to Intel's opening up of external processing. With Intel's significant expansion of factories in the US and Europe, this business is expected to continue to improve. However, the current revenue scale is still small and insignificant for Intel.

In addition to the improvement in revenue, Intel's profitability has also improved. The gross margin for the second quarter was 35.8%, better than the management's guidance of 33.2%.

Regarding the third quarter, the company's performance guidance is as follows:

The third-quarter revenue is expected to be $12.9 to $13.9 billion, with a median of $13.4 billion, higher than analysts' expectations of $13.28 billion. The gross margin is expected to be 39.1%, lower than analysts' expectations of 40.9%.

Overall, Intel's core business showed signs of improvement in the second quarter, and it is expected to see significant improvement in the fourth quarter. With the fundamentals showing signs of improvement, Intel's extremely low valuation is expected to see a rebound.

Looking to the future, Intel is ambitiously executing its IDM2.0 plan. According to management's guidance, its Intel4 process is progressing smoothly. If the announced '5 nodes in 4 years' process improvement plan is successfully completed, Intel is expected to return to the forefront of chip production technology. This will drive its core business back to its peak and may seize market share in the foundry market. Whether this will be successfully achieved remains to be seen, and investors can only wait and see!