2024-08-03 07:35:02
Chip giant Intel’s (INTC) stock price cratered than 26% in Friday trading, closing out one of its worst trading days in 40 years. The massive declines followed a disastrous second quarter earnings report Thursday during which the company shared anticipated third quarter earnings below Wall Street expectations and announced that it would be cutting 15% of its workforce and suspending its dividend payments amid a broader restructuring plan.
The decline was among the stock’s worst performances since at least 1982, according to available data from Bloomberg.
In its earnings release, Intel said it expects Q3 revenue of between $12.5 billion and $13.5 billion, well short of analysts’ expectations of $14.3 billion. The company reported earnings per share (EPS) of $0.02 on revenue of $12.8 billion.
Analysts were looking for EPS of $0.10 and revenue of $12.9 billion. The company saw EPS of $0.13 on revenue of $12.9 billion in the same quarter last year, according to analyst estimates compiled by Bloomberg.
Intel is in the midst of a massive turnaround effort as it seeks to regain PC chip market share lost to rival AMD (AMD). The company is also spending billions of dollars on factories and other facilities around the world as it seeks to reclaim its share of the chip manufacturing industry, which is dominated by Taiwan Semiconductor (TSMC).
Intel’s Data Center and AI segment brought in $3.05 billion in the quarter, below expectations of $3.07 billion. The Data Center and AI business offers Intel a chance to grow its revenue thanks to the massive demand for CPUs and GPUs to power AI applications. But Intel’s GPUs aren’t as in demand as Nvidia’s (NVDA), which are seen as the best overall chips for AI processing.
While Data Center and AI get the most attention, Intel’s Client segment, which includes sales of chips for enterprise and consumer computers, is still its largest overall business.
For the quarter, Intel saw Client revenue of $7.4 billion. Wall Street was anticipating revenue of $7.5 billion. The company saw Client revenue of $6.7 billion in the same quarter last year.
Intel, however, is facing a potentially existential threat in the PC space from an unlikely source: Qualcomm (QCOM). The company, which is better known for developing chips for smartphones and tablets, released its new Snapdragon X Elite PC chip as part of Microsoft’s new Surface Laptop and Surface Pro in May.
The chip offers better power and battery life than competing Intel and AMD chips, making it a quality rival for Apple’s own M-series chips. But Intel is expected to launch its answer to Qualcomm’s processor later this fall.
Then there’s Intel’s Foundry business. The company is opening up its foundries to third-party chip designers in the hopes that it can create a business to rival TSMC’s own foundry enterprise. But so far, Intel is its own biggest client. And while there are customers lined up, including Microsoft, it will take time for the company to gain traction in the market.
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