MW Intel's stock is among the biggest S&P 500 losers this year. Can earnings turn the tide?
By Emily Bary
Intel reports earnings Thursday afternoon
Chip-sector investors have been largely focused on artificial-intelligence, but when Intel Corp. reports earnings after Thursday's closing bell, it may be up to other factors to get the stock going.
Intel $(INTC)$, like many chip companies, is fighting to get its hands on lucrative technology budgets that are being poured into AI hardware. But it might be too early still for those efforts to manifest meaningfully in Intel's results.
HSBC analyst Frank Lee recently wrote that he doesn't expect that better-than-anticipated execution in Intel's client business will be enough to outweigh weaknesses in the foundry, data-center and AI businesses.
"However, stronger recovery in traditional non-AI servers could be [a] potential catalyst for the stock," he added.
That's critical for Intel shares, which have missed out on the sector's rise so far this year - in a big way. Some of the PHLX Semiconductor Index's SOX gains have recently evaporated, but that chip-sector benchmark is still up 10% thus far in 2024 and outpacing the S&P 500's 5% gain. Intel's stock, by contrast, is off 31% on a year-to-date basis and one of the S&P 500's steepest decliners.
See also: Intel's stock stems its bleeding upon launch of new AI chip
Analysts tracked by FactSet expect Intel to report adjusted earnings per share of 14 cents for the March quarter, whereas the company lost 4 cents a share on the metric a year earlier. Revenue is projected to climb to $12.8 billion from $11.7 billion.
The FactSet consensus calls for 30% growth in client-computing sales, to $7.5 billion, along with a 10% drop in data-center and AI revenue, to $3.3 billion. Network and edge revenue is projected to decline 11% to $178 million.
And Intel investors will have some new information to look at this time around, as the company recently broke out its product financials separately from its manufacturing ones in a bid to give investors better insight into their - thus far - disparate performances.
"[R]ecent foundry announcements finally cement the reality thatthe turnaround is only just getting started," Bernstein's Stacy Rasgon wrote recently. Intel's disclosures in early April about the state of the foundry business showed steep losses that are expected to grow further this year.
Rasgon added that a return to "even a little bit of growth" for Intel's personal-computing business might be "welcome" when the company reports results Thursday.
Trends there appear to be "somewhat anemic, and CPUs appear to have overshipped again in [the fourth quarter] which may bring risk into the first half of the year especially given the company's current call for an 'above-seasonal Q2' and an effective [second-half] hockey stick," Rasgon noted.
Susquehanna's Christopher Rolland will be looking for commentary on the state of AI spending from customers, relative to outlays for more traditional hardware.
"While we also continue to believe AI server [graphics-processing-unit] purchasing has crowded out [central-processing-unit] wallet share, some have suggested there could be a modest return to traditional server spend in [the second half of the year]," he wrote.
-Emily Bary
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April 25, 2024 12:30 ET (16:30 GMT)
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