Intel (INTC.US) is scheduled to report its first-quarter results following the opening of the U.S. stock market on Thursday, Eastern Standard Time (EST). Investors will be closely monitoring the tech giant's data center and artificial intelligence revenue growth, along with the latest updates in its foundry business.
Analysts anticipate that Intel will report a first-quarter revenue of $12.95 billion, an increase from $11.72 billion the previous year, as per estimates compiled by Visible Alpha. The adjusted net income is projected to be $593.5 million, a significant decrease from the same quarter of the prior year but an improvement from the net loss of $167 million reported in the year-ago quarter. The adjusted diluted earnings per share (EPS) are expected to turn profitable to 14 cents, up from a loss of 4 cents in the year-ago quarter.
Key Metrics: Data Center and AI Business Performance
In its earnings report, Intel is expected to disclose the data center and artificial intelligence revenue for the first quarter, offering investors insight into customer demand for these products.
UBS analysts noted that "demand signals for traditional servers have shifted favorably after a long period of weakness/decline," with companies such as Dell (DELL.US), AMD (AMD.US), and Micron Technology (MU.US) all reporting a rebound in demand.
Analysts expect Intel's data center and artificial intelligence divisions to experience a 6 percent growth from the previous year but anticipate no year-over-year change. UBS suggests that "hyperscale customers may reduce growth in AI server spending over the next few quarters and shift capital to traditional computing, driving demand somewhat" ahead of the anticipated launch of NVIDIA's (NVDA.US) Blackwell platform later in 2024.
Intel has faced challenges in keeping pace with industry peers like Nvidia and AMD amidst the AI boom. The company recently unveiled its latest AI chip, the Gaudi 3 AI accelerator, which Intel claims surpasses Nvidia's H100 in performance.
However, CFRA analyst Angelo Zino stated that his firm does not view "Intel as a threat to Nvidia in the near future" and for customers, Intel's offering is "just another option." Zino added that "Intel's long-term story remains in the foundry business," as the company does not manufacture "leading-edge AI chips" and is "clearly lagging behind," now finding it difficult to catch up with its rivals.
Business Highlights: Foundry Business Development
Intel has recently announced a new reporting structure in which it will report the financials of its foundry, or semiconductor manufacturing, business separately from other divisions. This change is part of the company's strategy to operate its foundry business as a more independent unit.
The new structure reveals expanding losses within its foundry business. Intel will also provide foundry revenue figures in its first-quarter report, potentially allowing investors to assess key metrics for the semiconductor manufacturing segment.
Bank of America analysts have indicated that the ability of Intel's foundry business to achieve profitability in a competitive market is a factor that will influence the stock's trajectory.
UBS analysts have commented that Intel's foundry business losses "are not entirely unexpected," but they do confirm that the chipmaker's costs are higher than those of its competitors. UBS remains optimistic that profitability will improve as the company overcomes its structural cost challenges, but they "recognize that most of the profitability improvement will only be realized in the post-2027 timeframe."
