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Will Revenue Contraction Hurt Intel's (INTC) Q2 Earnings?
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Intel Corporation (INTC - Free Report) is scheduled to report its second-quarter 2023 results on Jul 27, after the closing bell. The company delivered an earnings surprise of 10.14%, on average, in the trailing four quarters. In the last reported quarter, it delivered an earnings surprise of 75%.
This Santa Clara, CA-based semiconductor company is expected to have recorded year-over-year lower revenues due to a weak demand trend in several end markers, geopolitical volatility and an adverse macroeconomic situation.
Factors at Play
In the second quarter, Intel collaborated with Hewlett Packard Enterprise and the Department of Energy to facilitate the installation of the Aurora supercomputer at Argonne National Laboratory. Intel’s distributed asynchronous object storage is utilized in conjunction with HPE Slingshot high-performance fabric in the system to ensure high bandwidth, low latency and high I/O (input/output) operations per second. These are likely to get reflected in the upcoming results.
In the quarter under review, the company collaborated with Ericsson to accelerate 5G infrastructure development in Thailand. The joint venture will work to develop a wide range of enterprise applications that match the requirements of various sectors like manufacturing, transport and logistics and support communication service providers with a seamless adoption of 5G. This is likely to have cushioned the top line in the second quarter.
During the quarter, Intel collaborated with Boston Consulting Group (“BCG”) to develop enterprise-grade, reliable, customized and secure Generative AI solutions to help organizations optimize operations. Using Intel’s AI supercomputer, which is powered by Intel Xeon Scalable Processors and AI-optimized hardware accelerators, BCG employed a domain-specific foundation model trained on its own proprietary data.
The company also delivered cutting-edge multi-chip package prototypes to support the DoD’s (Department of Defense) mission to modernize and enhance the defense industrial base’s capability to develop and deploy equipment crucial for national security. These developments are likely to have had a favorable effect on second-quarter performance.
However, demand softness in consumer, education and small/medium businesses, along with PC end markets, are hurting Intel’s top-line figures. Rising geopolitical tension between the United States and China is a major concern. The export control measures to regulate the flow of AI chips to China by the U.S. government are likely to have hurt Intel’s operations.
Market volatility, inventory adjustments and macroeconomic challenges continue to weigh on net sales. A high debt burden restricts growth potential and makes it vulnerable to economic downturns. Foreign exchange also remains a headwind.
Our estimate for revenues from Client Computing Group is pegged at $5,799 million, suggesting a 24.5% year-over-year decline. Our estimate for net sales from Datacenter and AI Group is pegged at $3,779.1 million, indicating a decline from the $4,696 million reported in the year-ago quarter. Per our estimate, revenues from Network and Edge Group are projected to be $1,516.4 million, implying a 31.4% year-over-year decline.
For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $12,013 million, which indicates a decrease from the year-ago quarter’s reported figure of $15,321 million. The consensus estimate for adjusted earnings per share stands at -4 cents, suggesting a sharp fall from 29 cents reported in the prior year.
Key Developments in Q2
In the second quarter, Intel undertook various investment initiatives to augment its footprint in Europe. The company inked an agreement with the federal government of Germany to invest more than 30 billion euros to expand its upcoming semiconductor manufacturing facility in the European country. It also announced that it will develop a state-of-the-art semiconductor assembly and test facility near Wroclaw, Poland, to cater to the increased demand for advanced semiconductor solutions.
Earnings Whispers
Our proven model predicts a likely earnings beat for Intel this time around. 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 exactly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +19.64%. The Most Accurate Estimate is pegged at a loss of 3 cents while the Zacks Consensus Estimate stands at a loss of 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
T-Mobile US, Inc. (TMUS - Free Report) has an Earnings ESP of +3.94% and a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 27.
ON Semiconductor (ON - Free Report) has an Earnings ESP of +0.43% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 31.
Image: Bigstock
Will Revenue Contraction Hurt Intel's (INTC) Q2 Earnings?
Intel Corporation (INTC - Free Report) is scheduled to report its second-quarter 2023 results on Jul 27, after the closing bell. The company delivered an earnings surprise of 10.14%, on average, in the trailing four quarters. In the last reported quarter, it delivered an earnings surprise of 75%.
This Santa Clara, CA-based semiconductor company is expected to have recorded year-over-year lower revenues due to a weak demand trend in several end markers, geopolitical volatility and an adverse macroeconomic situation.
Factors at Play
In the second quarter, Intel collaborated with Hewlett Packard Enterprise and the Department of Energy to facilitate the installation of the Aurora supercomputer at Argonne National Laboratory. Intel’s distributed asynchronous object storage is utilized in conjunction with HPE Slingshot high-performance fabric in the system to ensure high bandwidth, low latency and high I/O (input/output) operations per second. These are likely to get reflected in the upcoming results.
In the quarter under review, the company collaborated with Ericsson to accelerate 5G infrastructure development in Thailand. The joint venture will work to develop a wide range of enterprise applications that match the requirements of various sectors like manufacturing, transport and logistics and support communication service providers with a seamless adoption of 5G. This is likely to have cushioned the top line in the second quarter.
During the quarter, Intel collaborated with Boston Consulting Group (“BCG”) to develop enterprise-grade, reliable, customized and secure Generative AI solutions to help organizations optimize operations. Using Intel’s AI supercomputer, which is powered by Intel Xeon Scalable Processors and AI-optimized hardware accelerators, BCG employed a domain-specific foundation model trained on its own proprietary data.
The company also delivered cutting-edge multi-chip package prototypes to support the DoD’s (Department of Defense) mission to modernize and enhance the defense industrial base’s capability to develop and deploy equipment crucial for national security. These developments are likely to have had a favorable effect on second-quarter performance.
However, demand softness in consumer, education and small/medium businesses, along with PC end markets, are hurting Intel’s top-line figures. Rising geopolitical tension between the United States and China is a major concern. The export control measures to regulate the flow of AI chips to China by the U.S. government are likely to have hurt Intel’s operations.
Market volatility, inventory adjustments and macroeconomic challenges continue to weigh on net sales. A high debt burden restricts growth potential and makes it vulnerable to economic downturns. Foreign exchange also remains a headwind.
Our estimate for revenues from Client Computing Group is pegged at $5,799 million, suggesting a 24.5% year-over-year decline. Our estimate for net sales from Datacenter and AI Group is pegged at $3,779.1 million, indicating a decline from the $4,696 million reported in the year-ago quarter. Per our estimate, revenues from Network and Edge Group are projected to be $1,516.4 million, implying a 31.4% year-over-year decline.
For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $12,013 million, which indicates a decrease from the year-ago quarter’s reported figure of $15,321 million. The consensus estimate for adjusted earnings per share stands at -4 cents, suggesting a sharp fall from 29 cents reported in the prior year.
Key Developments in Q2
In the second quarter, Intel undertook various investment initiatives to augment its footprint in Europe. The company inked an agreement with the federal government of Germany to invest more than 30 billion euros to expand its upcoming semiconductor manufacturing facility in the European country. It also announced that it will develop a state-of-the-art semiconductor assembly and test facility near Wroclaw, Poland, to cater to the increased demand for advanced semiconductor solutions.
Earnings Whispers
Our proven model predicts a likely earnings beat for Intel this time around. 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 exactly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +19.64%. The Most Accurate Estimate is pegged at a loss of 3 cents while the Zacks Consensus Estimate stands at a loss of 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Intel Corporation Price and EPS Surprise
Intel Corporation price-eps-surprise | Intel Corporation Quote
Zacks Rank: Intel currently has a Zacks Rank #2.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
Monolithic Power Systems, Inc. (MPWR - Free Report) is set to release quarterly numbers on Jul 31. It has an Earnings ESP of +0.31% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
T-Mobile US, Inc. (TMUS - Free Report) has an Earnings ESP of +3.94% and a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 27.
ON Semiconductor (ON - Free Report) has an Earnings ESP of +0.43% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 31.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.