Intel’s earnings and revenue likely to drop in Q2, focus on outlook

Intel Corp (NASDAQ: INTC) is set to report its second quarter 2019 results on July 25, Thursday after the market close. On average, analysts expect the chipmaker to earn $0.90 per share on revenue of $15.69 billion, representing a year-over-year decline of 13% in EPS from $1.04 and a 7.5% drop from revenue of $16.96 billion in the 2018 June quarter. Shares of Intel ended up 2.15% at $51.35 today. 

Intel had guided GAAP earnings of $0.83 per share for the second quarter on revenues of $15.6 billion. The company forecasted adjusted earnings to be $0.89 per share in the June quarter. When the company reports second quarter financial results, investors will be keenly focusing on what the company guides for the third quarter and second half of the year.

For the first quarter ended March 31, 2019, Intel’s bottom line beat consensus views, while revenue came in line with expectations. However, the weaker-than-expected 2019 outlook dragged the stock to the negative territory.

During the 2019 Investor Meeting in May, CEO Bob Swan said “We let you down” as the company cut down the fiscal 2019 outlook during its first quarter earnings reporting. The company forecasted full-year adjusted EPS at $4.35 per share, down approximately 5% year-over-year and $0.25 from its previous guidance. Revenue expectation of about $71.5 billion was reduced to $69 billion.

Read: Microsoft surpasses Q4 earnings and revenue estimates

Intel had planned to introduce a wide range of 10nm-based products in 2019 and 2020 and the company is expected to launch its first 7nm-based product in 2021. During the Investor Meeting, the semiconductor giant also revealed its plans to introduce new products in the areas of AI, 5G and autonomous driving.

Intel also described a three-year financial plan to achieve 2021 total revenue between $76 billion and $78 billion while growing free cash flow and reducing spending. The company signaled its ambition to achieve $85 billion in total revenue by 2022-2023.

Last Friday, Reuters reported that POTUS Trump is expected to meet the heads of Intel and Broadcom (NASDAQ: AVGO) today and discuss the ban on Huawei Technologies and other topics. The report added that this meeting will also be attended by the heads of Alphabet Inc’s (NASDAQ: GOOGL) Google and Micron Technology (NASDAQ: MU).

Market research firms IDC and Gartner reported recently that global PC shipments grew in the second quarter of 2019 compared to the same period a year ago. According to IDC, global PC shipments have grown 4.7% year-over-year to 64.9 million in Q2 and as per Gartner’s July report, global PC shipments have increased by 1.5% to 63 million units.

“Supply for Intel’s processors improved markedly during the quarter, allowing most PC vendors to fulfill old orders while also shipping a healthy supply of new PCs into the channels,” said Jitesh Ubrani of IDC. He also added that the fulfillment of order backlogs caused by the Intel CPU shortage from earlier this year contributed to the strong desktop shipments in the EMEA region during the second quarter.

Gartner’s senior principal analyst Mikako Kitagawa commented that there are signs that the Intel CPU shortage is easing, which has been an ongoing impact on the market for the past 18 months.

Intel’s peer Advanced Micro Devices (NASDAQ: AMD) is scheduled to report its recently ended quarter financial results on July 30, Tuesday. Philadelphia Semiconductor Index has been up about 2% today with all the semiconductor companies in green except Marvell Technology Group (NASDAQ: MRVL).

Intel stock had lost 14% after it reached its 52-week high ($59.59) on April 17, 2019, and it had advanced 9% since the beginning of 2019.

Update: After markets closed today, WSJ reported that Apple (NASDAQ: AAPL) is in discussion with Intel to buy the latter’s smartphone-modem chip business. Intel stock increased by about 2% during the extended hours of trading.

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