Will the Intel Share Price Continue to Fall Post-Q1 Earnings?

Intel’s slow progress on AI means the chipmaker has fallen behind the likes of AMD and Nvidia. Ahead of this Thursday’s earnings call, investors will be hoping that AI sales improved in Q1, while the numbers from its foundry business will also be in focus.

For the first time ever, Intel [INTC] disclosed financials for its foundry business in an SEC filing on 2 April.

The filing shows an operating loss of $7bn on revenue of $18.9bn in 2023, compared to a loss of $5.2bn on revenue of $27.5bn in 2022. Intel is expecting these foundry losses to peak this year and break even halfway between the current quarter and the end of 2030.

Intel revealed the financials as part of its restructuring, which has led to its foundry business separating from its products segment.

However, the revelation has weighed on Intel’s share price in the past month — it’s down 19.2% through 23 April and down 31.3% year-to-date.

Near-Term Earnings Outlook Disappoints

Investors will be hoping that Intel’s Q1 earnings, which will be reported after the bell on Thursday, 25 April, will help to reverse the share price’s recent downward trend.

The chipmaker expects Q1 revenue to be between $12.2bn and $13.2bn. At the midway point of $12.7bn, it expects the gross margin to be approximately 44.5% with an EPS of $0.13.

Speaking to analysts on the Q4 2023 earnings call at the end of January, CEO Pat Gelsinger warned of “discrete headwinds”, including a slowdown of Mobileye revenues, but added that this is likely to be temporary. Intel expects sequential and year-over-year growth in both revenue and EPS for each quarter in 2024.

“Momentum and excitement around new products and businesses remain strong as we head into the year and will grow stronger as the year progresses,” Gelsinger added.

He also promised to “execute on our mission to bring AI everywhere across our product segments”.

All Eyes on AI Performance

Revenue for Intel’s artificial intelligence (AI) and data centre segment fell 10% year-over-year in Q4 to $4bn and slumped 20% for the full fiscal year to $15.5bn.

At the beginning of April, Intel revealed its Gaudi 3 AI accelerator, which it hopes will bring “global enterprises choice for generative AI”; the company has been slow to join the AI race and is falling behind rival chipmakers, including Advanced Micro Devices [AMD] and Nvidia [NVDA], as a result. This is a cause for concern for some analysts.

"The real problem at Intel right now continues to be on the data centre and AI side of things … The fact of the matter is they don't have the right solutions out there to compete with the Nvidias [and] AMDs of the world,” Angelo Zino, Senior Industry Analyst at CFRA Research, told Yahoo Finance back in January.

Intel sees “meaningful revenue acceleration” for its flagging AI business in Q1, with its pipeline for 2024 having grown by double-digits from Q3 to above $2bn in Q4 2023.

If Intel surprises with its AI sales on Thursday, then it could give the stock a boost. If it disappoints, then this could drag the share price even lower.

Data correct as of Tuesday, 23 April.

Intel’s Share Price Slump

The Intel share price is up 17.6% in the past year through 21 April, but up just 2.3% in the past six months.

Intel isn’t the only semiconductor stock to keep an eye on this earnings season. Texas Instruments [TXN] reports after the bell Tuesday, Lam Research [LRCX] reports Wednesday and ON Semiconductor [ON] reports next Monday (29 April).

All four stocks are held by the Invesco PHLX Semiconductor ETF [SOXQ], with Intel allocated 3.5% of the portfolio as of 19 April. The fund is up 47.1% in the past year through 23 April and up 5.3% year-to-date.

The four stocks are also held by the First Trust Nasdaq Semiconductor ETF [FTXL], which has Intel as its fifth-biggest holding at a weighting of 7%. The fund is up 35.3% in the past year and down 0.5% year-to-date.