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Will Lower DataCenter Revenues Affect Q3 Earnings of Intel?
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Intel Corporation (INTC - Free Report) is scheduled to report third-quarter 2024 earnings after the closing bell on Oct. 31. In the to-be-reported quarter, the company is likely to have recorded lower revenues from the Datacenter and AI Group (DCAI) segment, owing to the fierce competition from other industry leaders amid a challenging macroeconomic environment. However, higher deployment of the Intel Gaudi 3 accelerator, Intel Core Ultra 200V series processors and advancements in artificial intelligence (AI)-accelerated high-performance computing may have acted as a tailwind.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Factors at Play
The DCAI segment seeks to develop leading data center products, including Intel Xeon servers and field programmable gate array products, while overseeing the overall AI strategy.
During the quarter, Intel collaborated with IBM to deploy its Gaudi 3 AI accelerators as a service in IBM Cloud. With this, IBM became the first cloud service provider to deploy Gaudi 3 across hybrid and on-premise environments. Aimed at offering improved visibility and control over the software stack, simplifying workload and application management, the collaboration intends to help customers cost-effectively scale enterprise AI workloads while prioritizing performance, security and resiliency.
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 company introduced Intel Core Ultra 200V series processors that mark an immense advancement in x86 processor technology, setting a new benchmark for graphics performance, improved security and power efficiency with unmatched AI computing capabilities. The state-of-the-art features will expedite the development and adoption of AI PCs, further solidifying its position as a frontrunner in the AI revolution.
The Intel Core Ultra features a neural processing unit, which enables power-efficient AI acceleration with 2.5x better power efficiency than the previous generation. Its newly launched vPro platform with Intel Core Ultra processor promises enhanced power efficiency. With dedicated AI acceleration capability spread across the central processing unit, graphics processing unit and the new neural processing unit, the company is expected to unlock an endless new wave of AI experiences across all apps. These developments are likely to have supported the DCAI segment’s top line during the quarter.
However, China's purported move to replace U.S.-made chips with domestic alternatives is expected to affect the segment’s revenues as Intel 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 U.S.-China 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.
Overall Expectations
The Zacks Consensus Estimate for DCAI revenues is pegged at $3.14 billion, indicating a decline from $3.81 billion in the year-ago quarter. Our estimate for revenues from this segment is pegged at $3.05 billion, suggesting a 0.9% year-over-year decline.
For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $13.01 billion, which indicates a decrease from the year-ago quarter’s reported figure of $14.16 billion. The consensus estimate for a loss per share is pegged at 3 cents, suggesting a decline from earnings of 41 cents reported in the prior year.
Earnings Whispers
Our proven model does not predict an earnings beat for Intel for the third 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 0.00% with a Zacks Rank #4 (Sell).
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Arista Networks Inc. (ANET - Free Report) is set to release quarterly numbers on Nov. 7. It has an Earnings ESP of +0.96% and carries a Zacks Rank #2.
The Earnings ESP for Altice USA, Inc. (ATUS - Free Report) is +66.67% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov. 4.
The Earnings ESP for Qualcomm Incorporated (QCOM - Free Report) is +0.48% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Nov. 6.
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Will Lower DataCenter Revenues Affect Q3 Earnings of Intel?
Intel Corporation (INTC - Free Report) is scheduled to report third-quarter 2024 earnings after the closing bell on Oct. 31. In the to-be-reported quarter, the company is likely to have recorded lower revenues from the Datacenter and AI Group (DCAI) segment, owing to the fierce competition from other industry leaders amid a challenging macroeconomic environment. However, higher deployment of the Intel Gaudi 3 accelerator, Intel Core Ultra 200V series processors and advancements in artificial intelligence (AI)-accelerated high-performance computing may have acted as a tailwind.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Factors at Play
The DCAI segment seeks to develop leading data center products, including Intel Xeon servers and field programmable gate array products, while overseeing the overall AI strategy.
During the quarter, Intel collaborated with IBM to deploy its Gaudi 3 AI accelerators as a service in IBM Cloud. With this, IBM became the first cloud service provider to deploy Gaudi 3 across hybrid and on-premise environments. Aimed at offering improved visibility and control over the software stack, simplifying workload and application management, the collaboration intends to help customers cost-effectively scale enterprise AI workloads while prioritizing performance, security and resiliency.
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 company introduced Intel Core Ultra 200V series processors that mark an immense advancement in x86 processor technology, setting a new benchmark for graphics performance, improved security and power efficiency with unmatched AI computing capabilities. The state-of-the-art features will expedite the development and adoption of AI PCs, further solidifying its position as a frontrunner in the AI revolution.
The Intel Core Ultra features a neural processing unit, which enables power-efficient AI acceleration with 2.5x better power efficiency than the previous generation. Its newly launched vPro platform with Intel Core Ultra processor promises enhanced power efficiency. With dedicated AI acceleration capability spread across the central processing unit, graphics processing unit and the new neural processing unit, the company is expected to unlock an endless new wave of AI experiences across all apps. These developments are likely to have supported the DCAI segment’s top line during the quarter.
However, China's purported move to replace U.S.-made chips with domestic alternatives is expected to affect the segment’s revenues as Intel 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 U.S.-China 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.
Overall Expectations
The Zacks Consensus Estimate for DCAI revenues is pegged at $3.14 billion, indicating a decline from $3.81 billion in the year-ago quarter. Our estimate for revenues from this segment is pegged at $3.05 billion, suggesting a 0.9% year-over-year decline.
For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $13.01 billion, which indicates a decrease from the year-ago quarter’s reported figure of $14.16 billion. The consensus estimate for a loss per share is pegged at 3 cents, suggesting a decline from earnings of 41 cents reported in the prior year.
Earnings Whispers
Our proven model does not predict an earnings beat for Intel for the third 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 0.00% with a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Intel Corporation Price and EPS Surprise
Intel Corporation price-eps-surprise | Intel Corporation Quote
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Arista Networks Inc. (ANET - Free Report) is set to release quarterly numbers on Nov. 7. It has an Earnings ESP of +0.96% and carries a Zacks Rank #2.
The Earnings ESP for Altice USA, Inc. (ATUS - Free Report) is +66.67% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov. 4.
The Earnings ESP for Qualcomm Incorporated (QCOM - Free Report) is +0.48% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Nov. 6.