Intel is expected to post a decline in adjusted profit when it reports earnings Thursday, and job cuts reportedly are on the horizon
Is Intel Corp. in "no man's land," or can the beleaguered semiconductor company get back on track?
The company could make some moves soon to try and improve its positioning in the eyes of investors. Those may include sizable job cuts, with Bloomberg News reporting that the company plans to eliminate thousands of roles in a cost-cutting drive. (Intel declined to comment on the report.)
Intel shares have been under pressure this year. Down 40% so far in 2024, they're among the worst performers in the S&P 500 SPX and the worst performer in the Dow Jones Industrial Average DJIA. And while semiconductor stocks in general have pulled back in recent weeks, Intel's stock has drawn investors' doubts for months - in light of concerns about the company's product positioning and the prospect of steep manufacturing losses going out numerous years.
With the current industry backdrop, Intel shares look to be "in no man's land," from the perspective of Bernstein analyst Stacy Rasgon. "PCs admittedly looked a bit better in [the second quarter], but [central processing units] appear to have overshipped meaningfully for the last several quarters which may damper things," he wrote.
Plus, he deems market-share losses in server CPUs to be "a significant issue" for Intel. And the company must contend with the boom in spending on AI graphics-processing units, which could be eating into budgets for the company's CPU offerings.
Intel is playing into AI too, but its story there "still feels mostly MIA," according to Rasgon, who isn't all too enthused about the potential for $500 million in second-half revenue there. For context, Advanced Micro Devices just booked its first quarter with revenue in excess of $1 billion from its AI-accelerator product.
Raymond James' Srini Pajjuri recently wrote of his projection that Intel could trail Wall Street expectations when it issues its third-quarter outlook.
The market for servers "is showing signs of recovery, and management previously guided for [a $500 million-plus] contribution from Gaudi accelerators" in the second half of the year, he wrote. But the "lingering impact from [a] Huawei ban and a more muted recovery in auto/industrial [markets] could limit [the third-quarter] revenue outlook to slightly above our $14 billion estimate but likely below consensus of $14.4 billion."
When Intel reports second-quarter earnings on Thursday afternoon, it's expected to post its second straight loss on a GAAP basis. Adjusted earnings per share, meanwhile, are expected to fall to 10 cents from 13 cents in the year-earlier period, and analysts were looking for declines on the metric in the following two quarters as well.
Intel mentioned "strong expense discipline" when it reported better-than-expected bottom-line performance last quarter. That focus on expenses could come into play if the company indeed moves forward with the reported job cuts.
Revenue, meanwhile, is expected to come in at $12.92 billion, according to the FactSet consensus. Intel posted $12.95 billion on the top line a year ago. Analysts model $7.42 billion in revenue from client computing, which represents the company's personal-computer business, along with $3.14 billion in revenue from data-center and AI sources. While the client forecast would translate to about 10% growth in that segment, the consensus view on data-center and AI revenue implies a nearly 22% projected decline.
Given the sharp drop in Intel's stock price this year, the bar seems low, and "any good news could create positive momentum for Intel," according to Wedbush analyst Matt Bryson.
Still, he and his team "continue to believe Intel's longer-term success is predicated upon successful execution of its fab strategy, and we will remain on the sidelines until we have more conviction on this front," he wrote. Intel is building out a foundry business that would manufacture chips for other companies.