Intel (NASDAQ: INTC ) shares were up 2.5% by 10 a.m. ET on Friday after favorable comments from the computer hardware giant that it is building out its computer software business.
As Reuters reports, Intel Chief Technology Officer Greg Lavender offered an upbeat outlook for Intel’s software outlook, saying the company is on track to hit $1 billion in software revenue by 2027.
Reading Between the Lines at Intel
Reuters referred to the figure as “cumulative,” but that may be a mistake: What Lavender actually said was that the company “has a goal of $1 billion in software and developer cloud subscriptions revenue, with a focus on artificial intelligence (AI), performance and cybersecurity software.”
To me, that sounds like $1 billion in 2027. And if Intel actually builds a $1 billion annual software business by 2027, that would represent 10x growth from 2021, when Intel’s total software revenue was just $100 million.
That would certainly be a very impressive growth.
Admittedly, $1 billion is a drop in the bucket compared to Intel’s core semiconductor business, which generated well over $50 billion in revenue last year. But when it comes to AI software specifically, Lavender noted that Intel is pushing open-source software that can be used to power a “wide range of AI chips,” Reuters reported. Success on this front could help Intel narrow Nvidia’s lead in AI chip sales a bit, indirectly boosting Intel’s main source of revenue.
Should Intel Stock Be a Buy?
That being said, I’m still not convinced Intel stock is a buy at its current valuation.
Although Intel is technically profitable with net income of $4.1 billion over the past year, it’s still burning through cash at a ferocious rate, posting negative free cash flow of $12.3 billion over the past 12 months, up from $9.6 billion in 2022. With cash burn expected to continue until at least 2027, Intel shares aren’t worth buying just yet.
Should I invest $1,000 in Intel right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Intel and has recommended buying Intel’s January 2025 $45 calls and selling Intel’s August 2024 $35 calls. The Motley Fool has a disclosure policy.
Why Intel shares soared on Friday was originally published by The Motley Fool.