Intel Corporation (INTC) is set to release its third-quarter 2024 financial results on October 31st, following a period marked by significant industry shifts and internal restructuring. While analyst Hans Mosesmann of Rosenblatt Securities anticipates results aligning with expectations, with the PC market showing signs of stabilization, he cautions that challenges persist, particularly within the data center sector where Intel faces growing competition from **Advanced Micro Devices (AMD)**. This, coupled with Intel’s ongoing internal transformation, casts a shadow on the company’s near-term outlook, despite efforts to adapt to a changing technological landscape dominated by the rise of **Artificial Intelligence (AI)**.
Key Takeaways: Intel’s Q3 Earnings on the Horizon
- Mixed outlook: While the PC market shows signs of stabilizing, the data center market remains challenging due to **AMD’s increasing market share.**
- Restructuring impact: Intel’s recent workforce reduction and dividend suspension reflect a push for greater agility in a slowing market, particularly for 2025.
- AI challenges: Intel’s struggle to capitalize on the current AI boom, coupled with roadmap improvements for CPUs and its Intel Foundry Services, add further complexity.
- Revenue projections: Q3 revenue is estimated at $13 billion, in line with consensus, while Q4 is projected at $14 billion, exceeding consensus estimates.
- Sell rating maintained: Despite some positive projections, the analyst maintains a **Sell rating** on INTC stock with a price target of $17.
Analyzing Intel’s Q3 Performance: A Closer Look
Rosenblatt’s Mosesmann projects Intel’s Q3 revenue at $13 billion, a figure that matches the consensus and represents an 8% year-over-year decline but a modest 1% quarter-over-quarter increase. This projection falls within Intel’s own guidance range of $12.5 billion to $13.5 billion, indicating a degree of confidence in the anticipated results, at least for the immediate term. However, the analyst’s perspective is nuanced, acknowledging the underlying complexities within the company’s performance.
The Data Center Dilemma
A key area of concern highlighted by Mosesmann is Intel’s performance within the crucial data center market. The analyst notes that Intel is facing significant **market share erosion** against AMD, a competitor rapidly gaining traction in this high-growth technology sector. This competition is particularly acute in the realm of **high-performance computing (HPC)** and the burgeoning **AI server market**, where AMD’s offerings have proven increasingly competitive, impacting Intel’s revenue streams and potentially threatening its long-term market dominance.
Navigating the AI Revolution
The rise of **AI** is fundamentally reshaping technology landscapes, and Intel’s ability to navigate this technological shift is paramount. Mosesmann points out that while the industry at large benefits from the explosion of AI-related applications, Intel is facing significant hurdles in capturing its full potential. The struggle to effectively compete with the rapidly evolving landscape of **AI accelerators (GPUs, etc.)** is reflected in the analyst’s less-than-optimistic outlook for Intel’s immediate future. Overhauling the company’s CPU roadmap and aggressively developing the Intel Foundry Services are key strategic steps to alleviate this situation, yet their immediate impact remains to be seen.
Intel’s Internal Restructuring: A Necessary Adaptation?
To address the challenges outlined above, Intel has undertaken a significant restructuring program. This includes a 15% reduction in its workforce and the **suspension of its dividend**. These drastic measures, while undoubtedly painful in the short term, are framed by Mosesmann and Intel’s leadership as necessary steps to improve agility and efficiency, enabling the company to better adapt to the changing market conditions and technological advancements.
Preparing for a Potential 2025 Slowdown
The analyst’s projections extend beyond the immediate quarters, offering insight into the anticipated long-term trajectory. Mosesmann’s forecast for fiscal year 2025 (FY25) paints a picture of **potential revenue and earnings falling short of consensus expectations**. This is a bold prediction, and suggests the analyst believes Intel´s restructuring might not fully resolve its current challenges by this date. The revenue projection for FY25 stands at $55 billion, while Non-GAAP EPS is predicted at $0.85 – both figures are noticeably below the consensus of $56.4 billion and $1.10 respectively, indicating a marked divergence between the analyst’s assessment and the overall market sentiment regarding Intel’s future performance.
Financial Projections and Analyst’s Outlook
For the December Quarter (Q4), Mosesmann projects revenue will reach $14 billion. This surpasses the current consensus estimate of $13.7 billion and represents a 9.1% year-over-year decline but a substantial 7.7% quarter-over-quarter growth. This suggests a potential turnaround in momentum, at least in the short term. However, the analyst emphasizes this should be taken in context of the broader challenges facing the firm. Finally, for the full year (FY24), projected revenue is $53 billion, slightly exceeding the consensus of $52 billion, with Non-GAAP EPS projected at $0.28, closely aligning with the consensus prediction.
Maintaining the Sell Rating
Despite some positive projections, especially for the December quarter and overall FY24, Mosesmann reiterates a Sell rating for Intel’s stock, maintaining a price target of **$17**. This bearish stance underlines the analyst’s concerns about Intel’s ability to overcome the competitive pressures in the data center market and fully leverage the opportunities presented by the rapidly evolving AI sector. The considerable gap between the current share price and the analyst’s price target further highlights the skepticism surrounding Intel’s near-term prospects.
INTC shares closed at $22.48, reflecting a 1.83% decrease at the time of writing. This, again, reflects the overall market sentiment towards Intel and the concerns triggered by the challenges the company faces.
