Does large-cap Semiconductors company Intel have a sustainably profitable business model? By studying its gross margins and comparing them to its operating margins, we can gain insight into quality of its business. With gross margins at 38%, you might be telling yourself the Intel is profitable -- but there is more to the story.
Gross margins take into account only the cost of revenue, meaning the expenses directly related to each sale. So it's important to also look at operating margins, which take into account overhead costs. One way to look at it is that gross profit gives insight into Intel's market and the viability of its business model. Operating margins, on the other hand, show you how efficiently the company is implementing this business model.
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 52,864,000 | 32,700,000 | 38 | -11.63 |
| 2022 | 63,054,000 | 36,188,000 | 43 | -21.82 |
| 2021 | 79,024,000 | 35,209,000 | 55 | -1.79 |
| 2020 | 77,867,000 | 34,255,000 | 56 | -5.08 |
| 2019 | 71,965,000 | 29,825,000 | 59 | -4.84 |
| 2018 | 70,848,000 | 27,111,000 | 62 |
Intel's gross margins are currently in the green, but this might not be the case for long. Since its cost of revenue is growing at a rate of 2.8% compared to -5.8% for its revenues, its gross margins have been shrinking -8.9% on average each year.
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 52,864,000 | 23,788,000 | -7 | -275.0 |
| 2022 | 63,054,000 | 24,532,000 | 4 | -84.0 |
| 2021 | 79,024,000 | 24,359,000 | 25 | -16.67 |
| 2020 | 77,867,000 | 19,934,000 | 30 | -3.23 |
| 2019 | 71,965,000 | 20,105,000 | 31 | -6.06 |
| 2018 | 70,848,000 | 20,421,000 | 33 |
Despite the negative operating margins in the last year, Intel's average is still positive, indicating that the company is generally profitable. There's a red flag, however, indicating that the last year could be part of a negative trend. Intel's operating expenses are growing at an average rate of 3.3%, whilst its revenues are growing at only -5.8%.
