Intel Q2 Earnings Ahead: EPS expected to drop 50% amid sales slump

Chipmaker Intel (NASDAQ:INTC) is set to report its second quarter earnings result on Thursday, July 24th, after the closing bell.

The company, which has been struggling with slumping sales after years of strategic missteps, is set to report its sixth consecutive net loss and a revenue drop for a fifth straight quarter.

Analysts expect Intel to report a decline of 50% in EPS to $0.01 on a more than 7% drop in sales to $11.88B.

According to several analysts, shareholders should focus on CEO Lip Bu-Tan’s plans for Intel’s contract manufacturing business.

Tan has been focusing on a next-gen chipmaking process called 14A, shifting away from 18A, a technology that his predecessor Pat Gelsinger had spent billions of dollars to develop.

Analysts believe that such a move could lead to a big writedown.

Loop Capital began coverage of Intel on Tuesday with a Hold rating and a $25 price target.

“The catch-22 situation for Intel is obvious,” said the analysts, noting that Taiwan Semiconductor Manufacturing’s (TSM) advanced-node manufacturing is better, and for Intel Products to become more competitive, TSM is the obvious manufacturing partner for Intel Products’ future compute tiles.

However, the analysts added that if Intel Foundry cannot rely on the volume from Intel Products, the company as a whole will struggle to cover fixed costs.

In the past two years, Intel has beaten both EPS and revenue estimates 75% of the time. Over the last three months, both top- and bottom-line estimates have seen 29 downward revisions.

According to Seeking Alpha analyst Hunting Alpha, Intel is losing market share at an accelerated pace in its core markets of servers and CPUs.

The company is growing at a woefully slow pace versus competitors.

“Management is focused on cost-cutting, margin improvement, and reduction of cash burn. These are small positives, but not enough to offset its poor revenue performance,” the analyst added.