- INTC up 12% ahead of Q2 report
- The market expects earnings and revenue to decline
- Focus on data center business
- Focus on impact of strong competition
Intel Corporation (NASDAQ: INTC) is scheduled to report its second-quarter results on July 22, 2021. The report comes at one of the most pivotal moments, with the overall stock market at an inflection point amid rising Covid-19 concerns compounded by increasing inflationary pressures.
Additionally, the stock has shed more than 19% in market value from the all-time highs recorded in April, even though the stock is up by about 12% year to date.
When Intel reports, the market will want to hear more beyond the company’s financial performance. The outlook of the data center business should arouse interest.
However, Wall Street is not overly optimistic about Intel’s earnings report, with analysts expecting the chip giant to post a year-over-year decline in earnings on lower revenues. A bigger miss could fuel another move lower on the stock price action.
The market has grown overly pessimistic about Intel’s prospects, given the lack of progress in some key segments. The data center and client computing units have been on a decline in recent quarters, all about arousing jitters in the investment community.
Q1 expectations
Intel is expected to post quarterly earnings of $1.06 a share, representing a 13.8% year-over-year decline. Earnings decline will come at the backdrop of the company delivering earnings surprises over the last four quarters. The company, on its part, projects earnings of $1.05 down from $1.23 a share reported a year ago.
Revenues should come in at about $17.73 billion, representing a 10.1% year-over-year decline. The decline could add to the frustration given that Intel has reported revenues that have topped estimates for nine straight quarters.
Revenue drop could come on the heels of Intel’s data center business coming under pressure, with analysts projecting an 8% decline in revenues to $5.84 billion. In the first quarter, the chip giant reported a 20% decline in revenues in the segment. In contrast, AMD has continued to register tremendous growth in the data center business.
What to look out for
Intel is poised to report its quarterly report when it is facing stiff competition from AMD and Nvidia. The two have gained significant market share in important chip developments, all but eating into the company’s revenue base.
When the company reports, the focus will be on the kind of impact that work-from-home and online learning waves have had on processor sales. Revenues are expected to receive a boost on strong demand for laptops and data center servers to address the working from the home trend.
Intel heads into the earnings session at the backdrop of PC shipments, showing signs of slowing down. However, strong demand for notebooks is believed to have offset any losses on the PC front, contributing to a much higher Computing Group segment revenues.
The focus will also be on the adoption of the Xeon processors expected to have a significant impact on the top line. Intel’s Optane DC Persistent Memory modules are in strong demand from tech heavyweights led by Microsoft, Oracle, and Google as they are used to power data centers. The two segments account for 28.3% and 53.9% of the company’s revenue base, respectively.
Intel has reiterated plans to increase fab capacity. The company intends to acquire AMD’s fab division GlobalFoundries for $30 billion in the recent past.
Bottom line
Intel is scheduled to report revenue and earnings decline when it reports its second-quarter report. A massive decline could weigh heavily on the stock, which has performed in line with the S&P 500. A better than expected report should strengthen investor’s sentiments which could result in the stock moving higher.
