Intel CEO Pat Gelsinger sees the company as the ‘next great growth story’

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Intel Corporation

CEO Pat Gelsinger said Thursday that the chip maker could be the stock market’s “next big growth story.”

The comments came at a meeting of analysts in San Francisco where Intel said it expects to increase its annual revenue growth to a range of 10% to 12% by 2025. The company’s revenue is down 4% in 2021.

Gelsinger said Intel expects overall low-single-digit revenue growth this year, accelerating to average to above-single-digit revenue in 2023/2024, reaching a low-double-digit range in 2025 and 2026.

Gelsinger laid out a broadly optimistic view across the company’s six business units. He wants Intel to double its earnings over time, while doubling the company’s price/earnings, a potential quadruple return on the stock.

“The curved Intel train is leaving the station,” he said.

Chief Financial Officer David Zinsner provided additional details in a later session, forecasting 2022 revenue of $76 billion, with earnings of $3.50 per share, gross margin of 52% and negative free cash flow of $1 billion to $2 billion, and $27 billion in spending. capitalist. . Wall Street analysts expected $75 billion in revenue and earnings of $3.54 per share.

Intel shares were down 1.5% in after-hours trading on Thursday, after falling 1.4% in the regular trading session.

Gelsinger sees low-to-mid single-digit annual growth in the core PC market over the 2026 period. He sees growth in the data center segment in the mid-to-high single-digit range through 2023, accelerating into the mid-teens by 2026. He predicted growth in the network and advanced computing market in the mid-adolescence until 2026.

Gelsinger sees significant future growth in the company’s accelerated computing and graphics market, as Intel will compete head-to-head with

nvidia

(NVDA) in Games, High Performance Computing, and Artificial Intelligence Applications. The sector is expected to approach $10 billion by 2026, from $700 million in 2021, with total exceeding $1 billion in 2022.

Gelsinger has not provided detailed guidance on the company’s Mobileye automotive segment, given the company’s plans to She later separated from the company in 2022; But he says work on the initial public offering is well underway.

As for Intel’s emerging foundry business, Gelsinger said the company has the potential to show significant growth by 2026, from $900 million in 2021, but did not provide a detailed forecast for revenue. Note that Newly announced acquisition From

semiconductor tower

Accelerates the company’s entry into the foundry market. Zinsner said the company expects high-digit growth from the foundry segment by 2026.

The CEO also said that Intel’s “innovative” approach to chip manufacturing envisions a sharp decline over the next year in the world’s dependence on chip manufacturing in Asia, to 50% by 2030 from 77% in 2020. It targets Europe’s contribution to chip manufacturing at 20 years . % of the global total by 2030, from 9%, with the US growing to 30% of the total, from 12%. Intel itself has announced new Vapor manufacturers in Arizona and Ohio.

Gelsinger said he sees the overall semiconductor industry doubling to $1 trillion in revenue by 2030. He also said that “Moore’s Law remains in place and in good health,” with individual components accelerating from 100 billion transistors to a trillion in 2030.

Zinsner said the company is targeting gross margins of 54% to 58% in 2025 and beyond, rising from a range of 51% to 53% through 2024. He also said the company is targeting free cash flow of 20% as a percentage of revenue through 2026, compared to neutral free cash flow in 2023 and 2024.

Zinsner also said the company is taking a “smart capital strategy,” using government incentives, customer prepayments and partner financing to offset at least 10% of costs in the company’s turnkey construction strategy. He expects capital intensity – capital expenditure as a percentage of revenue – to reach 35% in 2023 and 2024 as the company builds new fabs, then decline to about 25% in 2025 and beyond.

Write to Eric J. Savitz at [email protected]