By Mauro Orru
Infineon Technologies is scheduled to report results for its fiscal fourth quarter on Tuesday. Here is what you need to know:
REVENUE FORECAST: The German chip maker is expected to post revenue of 3.97 billion euros ($4.26 billion) in the three months to the end of September, according to a Vara Research consensus. The forecast is lower than revenue of 4.15 billion euros that Infineon reported a year earlier. Infineon had guided for revenue of around 4 billion euros in the quarter.
Chip makers have been grappling with uneven demand in recent months. Orders for chips to power artificial intelligence in data centers keep booming, but manufacturers of smartphones, laptops, electric vehicles and industrial machinery haven't placed many new orders for chips lately because they stockpiled the semiconductors they needed years back.
The schism in demand for AI chips and other semiconductors resulted in very different fortunes for chip makers. Those with significant AI exposure like Nvidia have grown exponentially in recent years, but companies mostly exposed to the automotive sector, industrial equipment and personal electronics have had to cut guidance to reflect sluggish demand.
Infineon slashed its sales forecasts three times in fiscal 2024. Rival STMicroelectronics, which counts Apple, Samsung Electronics and Tesla among its customers, also lowered its annual forecasts several times.
Infineon is particularly exposed to car makers since its automotive business generally accounts for the lion's share of sales. However, auto makers have been agonizing for months over a slow electric-vehicle market and fierce competition from local car makers in China, forcing several European auto manufacturers to lower their own profit and sales forecasts for the year.
EARNINGS FORECASTS: Net profit is expected to come down to 510 million euros from 753 million euros, according to the Vara Research consensus. Infineon's segment result, a key profitability metric, should decline to 788 million euros from 1.04 billion euros, generating a 19.9% margin. Infineon had guided for a margin of about 20% in the quarter.
Infineon shares are down more than 20% since January.
WHAT TO WATCH:
--GUIDANCE: Investors will focus on Infineon's guidance for the new fiscal year to the end of September 2025. The company is expected to report 15 billion euros in revenue and a 20.4% margin in fiscal 2024, and guide for revenue of 15.73 billion euros and a 20.7% margin in fiscal 2025, according to the Vara Research consensus.
Infineon is the first large European chip maker to provide guidance for the new year and, given the lack of visibility, it is expected to guide conservatively, UBS analysts wrote in a note to clients. They anticipate guidance of flat to low single-digit percentage revenue growth and a flat segment result margin.
Citi analysts said in a separate research note that they expected fiscal 2025 guidance to come below consensus. "We anticipate management to guide more weakly than we anticipated a month ago," they said.
Write to Mauro Orru at mauro.orru@wsj.com
(END) Dow Jones Newswires
November 11, 2024 05:20 ET (10:20 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments