Intel Corporation (NASDAQ: INTC) has recently faced fierce competition with AI chip rivals NVIDIA and CPU AMD. The semiconductor giant issued weak guidance after reporting revenue and net losses for the recent quarter. As the company announces its results for the first quarter next week, the market is looking for updates on management initiatives to revive its business and regain market leadership.
The tech company’s stocks have spiraled downward over the past few months, with their value almost halving over the past year. It has dropped by about 18% over the past six months alone. In February, unconfirmed reports from Broadcom and Taiwan Semiconductor Manufacturing Company came to an outbreak of stocks exploring a deal to split Intel’s business. But it quickly pulled back and continued downtrend over the next few weeks.
Suggesting last year’s revenue and profitability weakness last year took place in the early months of fiscal 2025, Market Watchers forecast a 3.3% decline in first quarter revenue to $123.1 billion. This is slightly higher than the company’s revenue guidance for the current fiscal year. Analysts forecast first quarter Nil earnings per share, compared to $0.18 per share in the same period last year. The first quarter report is scheduled to take place on Thursday, April 24th at 4pm ET.
Weak Q4
In the December quarter, Intel reported earnings of $0.13 per share, excluding special items, compared to $0.54 per share in the same period last year. If reported, it was a net loss of $116 million or $0.03 per share in the fourth quarter, compared to earnings of $2.67 billion or $0.63 per share in the previous year. Revenue for the fourth quarter was $14.3 billion, compared to $15.41 billion for the fiscal year 2023 response period. Revenues for our main operating segment, Client Computing, fell 9%.
The slowdown in business reflects competition with rival semiconductor companies that produce advanced chips, and matches/exceeds Intel’s product performance. Furthermore, the company has yet to make any meaningful intrusions into the AI chip market. This is currently dominated by Nvidia, which has high performance GPUs. Intel’s new CEO, Lip-Bu Tan, faces the tough job of transforming the company and preparing for the future.
Cost pressure
Intel’s bottom line is under pressure from the recent rapid rise in operating expenses, and is primarily linked to large investments in manufacturing facilities as they work to expand their foothold in the AI chip segment. The company’s decline in profitability reflects pricing pressures and rising costs
From Intel’s fourth quarter 2024 revenue calls:
“…We’ve invested ahead of demand over the past few years. These capital investments can meet the expected demand at lower levels of spending to drive our 2025 net assets of $8 billion to $11 billion more efficiently, in order to deploy our capital more efficiently. They’ll be unlocked across operations, as well as non-core assets.”
Outlook
Intel Leadership covers approximately $20 billion in total capital investment for fiscal year 2025. This is a minimal amount of previous guidance, reflecting further capacity adjustments to Ohio and Ireland facilities, as well as improved cost and resource management on ongoing projects. Recently, the company signed an agreement to sell 51% Alter Silver Lake, a business-to-tech investment company.
Intel shares fell on Thursday morning, continuing the downtrend experienced in recent sessions. The average stock price for the past 52 weeks was $24.60.
