Intel’s (NASDAQ: INTC) Q1 earnings report is just around the corner on April 25th, and while many tech investors wouldn’t think too much of this event, especially with the majority of the Magnificent Seven also reporting earnings soon, there’s a lot to unpack for those who follow the chip giant and INTC stock closely. In fact, some investors and analysts are saying that Intel’s earnings could shake up the semiconductor market.
Wall Street’s Expectations
For the first time in Intel’s history, the semiconductor company is set to report the financials of its product design businesses separately from its chip manufacturing operations. The company revealed this new structure earlier this month, and what this means is that future earnings releases will look substantially different than previous ones.
For Intel’s upcoming Q1 report, Wall Street analysts have revealed that they expect the chip company to post quarterly earnings of $0.13 per share, indicating a year-over-year growth of 425%. They also expect Intel’s revenues to be around $12.76 billion, up 8.9% from the same quarter a year ago. However, not all analysts are bullish on the company, and some of them even expect it to miss on its earnings for this quarter.
Will Intel Miss?
Wall Street might be bullish on Intel, as analysts set a 12-month price target of $45.2, which is approximately a 32% upside from where the stock is trading now. But, in the last 30 days, there has been a downward revision of 5.8% in the Wall Street consensus EPS estimate for the quarter, and while this may not seem like a huge difference, the revision still signifies the analysts’ collective reconsideration of their initial forecasts over the course of this timeframe.
This is very important for investors to consider, especially because there is a strong link between trends in earnings estimate revisions and the short-term price performance of a stock. Many tech investors might say that Intel has struggled to keep up with peers like Nvidia (NASDAQ: NVDA) and AMD (NASDAQ: AMD) amid the AI boom, even as the company recently unveiled its latest AI chip, the Gaudi 3 AI accelerator, which can, according to Intel, outperform Nvidia’s flagship H100.
However, analysts like CFRA’s Angelo Zino are not so optimistic. According to Zino, he doesn’t view Intel as a threat for Nvidia in the near future, but only as another option out there for customers. He also added that the long-term story for Intel continues to be on the foundry side of things, because the company is not producing leading-edge AI chips, has clearly fallen behind, and is now playing a difficult game of catch-up with its competitors.
What Should Investors Watch Out for?
For Intel’s upcoming earnings call, there are some key areas that analysts, investors, and tech enthusiasts alike will be keeping a close eye on. First of all, we have data centers and AI. These sectors are the current darlings of the tech world, and strong performance here for Intel could be a significant indicator of future growth. Intel is exerting efforts to support advanced processing nodes, and one example of that is the recent partnership with ASML (NASDAQ: ASML) to assemble a TwinScan scanner from ASML. This collaboration makes Intel the first in the industry to receive a high NA EUV tool.
According to the company’s executives, this tool can change the optics design for projecting printed images on a silicon wafer, drastically boosting the resolution and scalability of up-and-coming processors. Now, quite a few analysts are bullish on this metric. For one, UBS analysts said that they expect Intel’s data-center and AI sales to rise 6% from the previous quarter, even though they may remain flat year-over-year.
Therefore, Intel’s management team, and CEO Pat Gelsinger will likely talk about customer demand for the company’s AI solutions, and how they’re faring against the competition. But, investors should also pay attention to anything they say about the PC industry. When the company reported 2023 Q4 earnings, it said that it expected a rebound in the PC sector in 2024, which would definitely help the company. However, semiconductor industry giants like ASML and TSMC (NYSE: TSM) have recently said that the rebound in the sector won’t be as strong as originally expected this year, so Intel will need to update investors on that in the upcoming earnings call.
Intel’s Foundry Business
Intel’s Foundry business is another key area that will be considered, especially since Intel is making waves by establishing its foundry business as a more independent unit. In fact, Bank of America analysts have noted that Intel’s foundry business’ ability to be profitable in a competitive environment plays a role, among other factors, in the bull and bear cases for the stock.
Therefore, investors may want to know if Intel is on track to become a bigger player in the chip-making game, because if that happens, then it could have major implications for the industry as a whole. Earlier this year, Intel reported a $7 billion loss in its foundry business, but it’s important to note that UBS analysts have mentioned that Intel’s foundry losses are not entirely unexpected, as the chipmaker’s costs are higher than its competitors.
These analysts also added that although UBS remains optimistic that profitability will improve as Intel transitions away from structural cost challenges, it is also cognizant that most of the profitability improvement only materializes in 2027 and afterwards. Additionally, Intel’s CFO, David Zinsner, said last quarter that the company managed to save $3 billion by increasing its operational efficiency, adding that 2024 will be even better for efficiency as the company implements its new internal foundry model, so that’s another thing investors should watch out for in the earnings call.
It’s very rare that a company is able to expand into manufacturing and new lines of businesses, and still accomplish cost efficiency, so that’s great on Intel’s part. Investors shouldn’t be too worried about Intel’s foundry business because this part of the company’s business is supported by the U.S. government, which keeps offering billions in incentives for the development and manufacturing of chips in the country, and that’s exactly what Intel is doing.
INTC Stock Forecast
Intel is forecasting 2024 Q1 revenue of $12.2 billion to $13.2 billion, and they’re expecting a loss per share of $0.25. For the full year, Intel said that they remain focused on achieving process and product leadership, continuing to build their foundry business, and executing the company’s mission of bringing AI everywhere to drive long-term value for shareholders.
Over the next few years, Wall Street is very optimistic about Intel’s earnings, expecting an EPS of $1.26 for this year, and $2.09 for 2025. For the next five years, analysts expect Intel to deliver 40% EPS growth for each year, which is why the stock might be a great buying opportunity right now. Still, it’s always riskier to buy the stock right before earnings, so investors who are interested in INTC stock, but still want to lower their risk, could buy some shares before earnings to not miss out on a potential upside if earnings turn out to be better than expected, then buy more after earnings in case of a dip.
We don’t really know which way INTC stock will go after earnings, so in the end, the real story will lie in the performance of key sectors like data center and AI, the progress of the foundry business, and any hints about future innovations. Therefore, we’ll see how it all plays out when Intel releases the results. Notably, INTC stock is down significantly now, as it was trading very close to $50 in the beginning of the year.
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