Intel Corporation (NASDAQ: INTC) has been facing intense competition from rivals Nvidia in AI chips and AMD in CPUs, lately. The Semiconductor giant issued weak guidance after reporting lower revenues and a net loss for its most recent quarter. When the company announces first-quarter results next week, the market will be looking for updates on the management’s initiatives to revive the business and reclaim market leadership.
The tech firm’s stock has been in a downward spiral over the past several months, with the value nearly halving in the past year. It has dropped about 18% in the past six months alone. In February, the stock popped following unconfirmed reports of Broadcom and Taiwan Semiconductor Manufacturing Company exploring deals that would split Intel’s operations. However, it soon pulled back and continued the downtrend in the following weeks.
Suggesting that last year’s weakness in revenue and profitability has extended into the early months of FY25, market watchers project a 3.3% decrease in first-quarter revenues to $12.31 billion. That is slightly higher than the company’s revenue guidance for the period. Analysts predict nil earnings for Q1, on a per-share basis, compared to $0.18 per share in the year-ago quarter. The Q1 report is expected to come on Thursday, April 24, at 4:00 pm ET.
Weak Q4
For the December quarter, Intel reported earnings of $0.13 per share, excluding special items, compared to $0.54 per share in the year-ago quarter. On a reported basis, it was a net loss of $126 million or $0.03 per share for Q4, compared to a profit of $2.67 billion or $0.63 per share a year earlier. Fourth-quarter revenue was $14.3 billion, compared to $15.41 billion in the corresponding period of fiscal 2023. Revenues of Client Computing, the company’s main operating segment, dropped 9%.
The slowdown in the business mainly reflects competition from rival semiconductor firms that produce advanced chips, matching/exceeding the performance of Intel’s products. In addition, the company is yet to make meaningful inroads into the AI chip market, which is currently dominated by Nvidia with its high-performance GPUs. Intel’s new CEO, Lip-Bu Tan faces the tough task of transforming the company and preparing it for the future.
Cost Pressure
Intel’s bottom line has been under pressure from a sharp increase in operating expenses lately, mainly related to heavy investments in manufacturing facilities as the company works to expand its foothold in the AI chip segment. The company’s declining profitability reflects mounting pricing pressure and rising costs
From Intel’s Q4 2024 earnings call:“…we invested ahead of demand over the past few years, and these capital investments will enable us to meet expected demand at a lower level of spending as we drive to more efficiently deploy our capital. We expect 2025 net capex of $8 billion to $11 billion, with roughly half of the offsets expected to come from government incentives and tax credits and half from partner contributions. Delivering in 2025 remains a top priority for us on lower capex, increased cash from operations, and value unlocked across our noncore assets.”
Outlook
The Intel leadership targets gross capital investments of around $20 billion for fiscal 2025, which is at the low end of its earlier guidance, reflecting further capacity adjustments to the Ohio and Ireland facilities, as well as better cost and resource management with ongoing projects. Recently, the company signed an agreement to sell 51% of its Altera business to technology investment firm Silver Lake.
Intel’s shares traded lower on Thursday morning, continuing the downtrend experienced in recent sessions. The average stock price for the last 52 weeks is $24.60.
