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Should You Bet on Intel (INTC) Ahead of Q2 Earnings Release?
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Intel Corporation (INTC - Free Report) is scheduled to report second-quarter 2024 earnings on Aug 1. The Zacks Consensus Estimate for revenues and earnings is pegged at $12.9 billion and 10 cents per share, respectively.
Earnings estimates for INTC have declined from $1.12 per share to $1.03 for 2024 and from $1.89 per share to $1.82 for 2025 over the past 90 days.
INTC Estimate Trend
Image Source: Zacks Investment Research
Earnings Surprise History
The leading semiconductor manufacturer delivered a four-quarter earnings surprise of 145.4%, on average, beating estimates on each occasion. In the last reported quarter, the company pulled off an earnings surprise of 38.5%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for Intel for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Intel currently has an ESP of +10.79% with a Zacks Rank #4 (Sell).
During the quarter, Intel showcased the industry’s first fully integrated optical compute interconnect (OCI) chiplet, marking a significant step forward in high-speed data transmission. Designed to support 64 channels of 32 gigabits per second (Gbps) data transmission in each direction on up to 100 meters of fiber optics, the OCI chiplet enables future scalability of CPU/GPU cluster connectivity and novel computing architectures, including coherent memory expansion and resource disaggregation. Boasting high power efficiency and low latency, it offers an ideal solution for data centers and high-performance computing environments.
In addition, Intel is scaling its AI footprint to edge devices and PCs with its Core Ultra processors, supporting more than 100 software vendors and 300 AI models. The new Lunar Lake architecture, featuring advanced graphics and AI processing power, promises significant performance and energy efficiency improvements. Additionally, Intel's updates on next-generation products across all segments of enterprise AI, including the new Intel Xeon 6 processors and Intel Core Ultra client processors, further solidify its position as a frontrunner in the AI revolution.
The company has also introduced the Intel Gaudi 3 accelerator and a suite of open, scalable systems for AI adoption across various sectors. Equipped with up to tens of thousands of accelerators interconnected through Ethernet, the Gaudi 3 accelerator promises a substantial boost in AI training and inference capabilities, enabling global enterprises to deploy AI at scale with ease. These are likely to have generated incremental revenues in the quarter.
However, China's purported move to replace U.S.-made chips with domestic alternatives could significantly affect Intel as it derives a significant portion of its revenues from the communist nation. The recent directive to phase out foreign chips from key telecom networks by 2027 underscores Beijing's accelerating efforts to reduce reliance on Western technology amid escalating Sino-U.S. tensions.
As Washington tightens restrictions on high-tech exports to China, Beijing has intensified its push for self-sufficiency in critical industries. This shift poses a dual challenge for Intel, as it faces potential market restrictions and increased competition from domestic chipmakers.
In addition, Intel is witnessing intensifying competition in the server, storage and networking markets from its rivals like Advanced Micro Devices, Inc. (AMD - Free Report) , Arm Holdings plc (ARM - Free Report) and NVIDIA Corporation (NVDA - Free Report) . These are likely to have adversely impacted its bottom line in the quarter.
Price Performance
Over the past year, Intel has lost 12.4% against the industry’s growth of 106.6%, lagging its peers.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, Intel appears to be relatively cheaper compared to the industry and below its mean. Going by the price/sales ratio, the company shares currently trade at 2.24 forward sales, lower than 17.35 for the industry and the stock’s mean of 2.79.
Image Source: Zacks Investment Research
Investment Considerations
Intel's innovative AI solutions are set to benefit the broader semiconductor ecosystem by driving down costs, improving performance and fostering an open, scalable AI environment. The company’s latest Xeon, Gaudi and Core Ultra platforms are designed to deliver flexible, secure, sustainable and cost-effective solutions for maximizing AI opportunities. These advancements not only position Intel as a leader in AI but also catalyze industries to embrace AI's transformative potential, paving the way for unprecedented innovation and growth.
However, increasing competition from other established players and emerging China-based firms is likely to adversely impact its bottom line. The communist nation’s stonewalling efforts with the push for technological autonomy could reshape the dynamics of the semiconductor industry and affect Intel’s performance to a large extent.
End Note
Intel's strategy for open, scalable AI systems extends beyond hardware, encompassing software, frameworks and tools. By fostering a broad ecosystem of AI players, including equipment manufacturers, database providers and software developers, Intel aims to offer enterprises a diverse range of solutions that cater to their unique GenAI requirements. This collaborative approach not only promotes innovation but also enhances interoperability and compatibility, empowering enterprises to leverage existing ecosystem partners with confidence.
However, it appears that the recent product launches are “too little too late” for Intel. With declining earnings estimates and abysmal price performance compared with its peers, the stock is witnessing a negative investor perception, although trading relatively cheaply. Consequently, it might not be a prudent investment decision to bet on the stock at the moment.
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Should You Bet on Intel (INTC) Ahead of Q2 Earnings Release?
Intel Corporation (INTC - Free Report) is scheduled to report second-quarter 2024 earnings on Aug 1. The Zacks Consensus Estimate for revenues and earnings is pegged at $12.9 billion and 10 cents per share, respectively.
Earnings estimates for INTC have declined from $1.12 per share to $1.03 for 2024 and from $1.89 per share to $1.82 for 2025 over the past 90 days.
INTC Estimate Trend
Image Source: Zacks Investment Research
Earnings Surprise History
The leading semiconductor manufacturer delivered a four-quarter earnings surprise of 145.4%, on average, beating estimates on each occasion. In the last reported quarter, the company pulled off an earnings surprise of 38.5%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for Intel for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Intel currently has an ESP of +10.79% with a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping the Upcoming Results
During the quarter, Intel showcased the industry’s first fully integrated optical compute interconnect (OCI) chiplet, marking a significant step forward in high-speed data transmission. Designed to support 64 channels of 32 gigabits per second (Gbps) data transmission in each direction on up to 100 meters of fiber optics, the OCI chiplet enables future scalability of CPU/GPU cluster connectivity and novel computing architectures, including coherent memory expansion and resource disaggregation. Boasting high power efficiency and low latency, it offers an ideal solution for data centers and high-performance computing environments.
In addition, Intel is scaling its AI footprint to edge devices and PCs with its Core Ultra processors, supporting more than 100 software vendors and 300 AI models. The new Lunar Lake architecture, featuring advanced graphics and AI processing power, promises significant performance and energy efficiency improvements. Additionally, Intel's updates on next-generation products across all segments of enterprise AI, including the new Intel Xeon 6 processors and Intel Core Ultra client processors, further solidify its position as a frontrunner in the AI revolution.
The company has also introduced the Intel Gaudi 3 accelerator and a suite of open, scalable systems for AI adoption across various sectors. Equipped with up to tens of thousands of accelerators interconnected through Ethernet, the Gaudi 3 accelerator promises a substantial boost in AI training and inference capabilities, enabling global enterprises to deploy AI at scale with ease. These are likely to have generated incremental revenues in the quarter.
However, China's purported move to replace U.S.-made chips with domestic alternatives could significantly affect Intel as it derives a significant portion of its revenues from the communist nation. The recent directive to phase out foreign chips from key telecom networks by 2027 underscores Beijing's accelerating efforts to reduce reliance on Western technology amid escalating Sino-U.S. tensions.
As Washington tightens restrictions on high-tech exports to China, Beijing has intensified its push for self-sufficiency in critical industries. This shift poses a dual challenge for Intel, as it faces potential market restrictions and increased competition from domestic chipmakers.
In addition, Intel is witnessing intensifying competition in the server, storage and networking markets from its rivals like Advanced Micro Devices, Inc. (AMD - Free Report) , Arm Holdings plc (ARM - Free Report) and NVIDIA Corporation (NVDA - Free Report) . These are likely to have adversely impacted its bottom line in the quarter.
Price Performance
Over the past year, Intel has lost 12.4% against the industry’s growth of 106.6%, lagging its peers.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, Intel appears to be relatively cheaper compared to the industry and below its mean. Going by the price/sales ratio, the company shares currently trade at 2.24 forward sales, lower than 17.35 for the industry and the stock’s mean of 2.79.
Image Source: Zacks Investment Research
Investment Considerations
Intel's innovative AI solutions are set to benefit the broader semiconductor ecosystem by driving down costs, improving performance and fostering an open, scalable AI environment. The company’s latest Xeon, Gaudi and Core Ultra platforms are designed to deliver flexible, secure, sustainable and cost-effective solutions for maximizing AI opportunities. These advancements not only position Intel as a leader in AI but also catalyze industries to embrace AI's transformative potential, paving the way for unprecedented innovation and growth.
However, increasing competition from other established players and emerging China-based firms is likely to adversely impact its bottom line. The communist nation’s stonewalling efforts with the push for technological autonomy could reshape the dynamics of the semiconductor industry and affect Intel’s performance to a large extent.
End Note
Intel's strategy for open, scalable AI systems extends beyond hardware, encompassing software, frameworks and tools. By fostering a broad ecosystem of AI players, including equipment manufacturers, database providers and software developers, Intel aims to offer enterprises a diverse range of solutions that cater to their unique GenAI requirements. This collaborative approach not only promotes innovation but also enhances interoperability and compatibility, empowering enterprises to leverage existing ecosystem partners with confidence.
However, it appears that the recent product launches are “too little too late” for Intel. With declining earnings estimates and abysmal price performance compared with its peers, the stock is witnessing a negative investor perception, although trading relatively cheaply. Consequently, it might not be a prudent investment decision to bet on the stock at the moment.