Intel Q2 Earnings Preview: Earnings Estimates, What Analysts Are Saying And Why AI Is Still The Biggest Topic Of Discussion

Zinger Key Points
  • Intel beat revenue and eps estimates in the first quarter, but has missed estimates in the majority of the last four quarters.
  • Intel shares are up 29% year-to-date, but trail the performance of other leading semiconductor stocks.

Semiconductor company Intel Corporation INTC is set to report second quarter financial results after market close Thursday.

Here are the key points to watch.

Earnings Estimates: Intel is expected to report second-quarter revenue of $10.97 billion, according to analyst estimates data from Benzinga Pro.

The company reported revenue of $15.32 billion in the second quarter of last year and $11.72 billion in the first quarter of the current fiscal year. This would mark a decline in revenue on both a year-over-year and quarter-over-quarter basis.

Intel has missed Street consensus estimates for revenue in three of the last four quarters.

Estimates from analysts for earnings per share see Intel posting a loss of three cents per share in the second quarter. The company reported earnings per share of 29 cents in the second quarter last year and posted a loss of four cents in the first quarter of the current fiscal year.

After beating earnings per share estimates from analysts for over 10 straight quarters, Intel has missed EPS estimates in two of the last four quarters.

In the first quarter, Intel beat estimates from the Street for both earnings per share and revenue.

Guidance from the company for second-quarter revenue calls for a range of $11.50 billion to $12.50 billion.

Related Link: Intel Discloses $32.7B Investment In Germany Projects, Creation Of More Than 10,000 Jobs

What Analysts Are Saying: Product delays, cyclical factors and market share losses are factors that see Rosenblatt analyst Hans Mosesmann having a Sell rating on Intel.

“We are not confident in our forecast of high-single digit sales growth for 3Q23, due to continued delays or weak ramp up in data center products, AMD share losses, offset somewhat by normalization in client PC markets,” Mosesmann said.

The analyst, who has a price target of $17 on Intel shares, said gross margins could recover in the second quarter, but visibility is limited due to data center yields.

“We expect Intel to deliver revenue for the June quarter in-line with our estimate of $12.0 billion, which is roughly in-line with consensus.”

Market share losses to companies like Advanced Micro Devices AMD remain a major concern for the analyst.

“While Intel’s roadmap aims to improve competitiveness, we see share shifts to AMD, Broadcom, Marvell and Nvidia continuing through 2025.”

Mizuho Securities analyst Vijay Rakesh has a more positive view on Intel ahead of the earnings print with a Neutral rating.

Rakesh sees the surge in artificial intelligence applications benefitting the entire semiconductor sector, with Nvidia Corporation NVDA being the biggest beneficiary. The analyst sees Intel and Advanced Micro Devices also benefitting in the longer term.

Rakesh raised the price target from $30 to $33 on Intel and said the company could benefit from increased valuations for semiconductor stocks. The analyst also sees Intel pulling in additional revenue from artificial intelligence initiatives.

Key Items to Watch: Artificial intelligence remains a key area of interest that analysts and investors will be watching for the second quarter.

In the first quarter, the company highlighted its Data Center and AI division as a critical part of its portfolio as it looks to “truly democratize AI through an open and secure ecosystem approach.”

Other semiconductor companies have highlighted their AI initiatives and opportunities in recent reports, and big technology companies have as well.

Intel will likely mention AI in terms of spending, growth and long-term opportunities.

Another key item to watch will be Intel’s business units. In the first quarter, four of the company’s five business segments saw year-over-year declines. Each of the declines was 24% or more on a year-over-year basis.

  • Client Computing Group: $5.8 billion, -38% year-over-year
  • Data Center and AI: $3.7 billion, -39% year-over-year
  • Network and Edge: $1.5 billion, -30% year-over-year
  • Mobileye: $458 million, +16% year-over-year
  • Intel Foundry Services: $118 million, -24% year-over-year

Investors and analysts will be watching to see if any of the units can reverse their declining trends.

The lone exception to the losses was the Mobileye segment, which has been spun out by Intel and is now traded as Mobileye Global MBLY. The spun-off company reported quarterly results earlier Thursday.

INTC Price Action: Shares of Intel are trading 0.9% higher at $34.69 Thursday, versus a 52-week trading range of $24.59 to $40.42.

Shares of the semiconductor company are up 29% year-to-date in 2023. While the gains by Intel are pacing ahead of the S&P 500, the performance trails other leading semiconductor companies.

Nvidia shares are up 225% year-to-date in 2023 and AMD shares are up 74% year-to-date in 2023.

A strong report from Intel or impressive guidance could get Intel closer to its peers for stock performance.

Read Next: Intel's Acquisition Target Tower Semiconductor Stock Is Trading Higher Wednesday, Here's Why 

Photo: Shutterstock

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Posted In: EarningsNewsPreviewsTrading IdeasAI stocksartificial intelligenceartificial intelligence stocksChip StocksHans MosesmannmizuhoRosenblattsemiconductor stocksVijay Rakesh
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