Intel’s (NASDAQ:INTC) third quarter results on Thursday will give investors an idea of whether the recent investments and strategies under CEO Lip-Bu Tan can bring the struggling chipmaker back to life.
Wall Street expects the Santa Clara, California-based company to post EPS of $0.01 on revenue of $13.14 billion, implying a drop of over 1% during the quarter.
Faced with slumping sales and years of mismanagement, Intel brought Lip-Bu Tan in as CEO to revive its fortune. The chipmaker said that it expects to break even on earnings during the third quarter.
Intel’s stock has recently benefited from several investments, which includes a $2B dollar investment from Japan’s SoftBank and a blockbuster deal with AI giant Nvidia (NVDA).
Intel reportedly also engaged in early discussions with Advanced Micro Devices (AMD) to add the Lisa Su-led company as a potential customer for its nascent foundry business. This comes after the Trump administration, in August, took an $11.1B, or 10%, stake in the company.
Even though the stock got a boost, analysts are still neutral. Seeking Alpha analysts, Wall Street and Seeking Alpha’s Quant ratings consider the company a Hold.
“While we do believe these deals bolster INTC’s balance sheet, we are less certain around near or longer -term positive business ramifications that might result from this newsflow,” noted Wedbush analyst Matt Bryson. However, he added that results and guidance should exceed consensus forecasts given a better industry backdrop than the brokerage had previously contemplated.
Earlier in the month, HSBC analyst Frank Lee downgraded shares and said further deals are expected to drive a short-term re-rating. However, Lee believes that Intel’s own fab execution remains key to any sustainable turnaround.
As part of its new strategy, Intel said it wants a disciplined approach towards investing in the next-generation 14A manufacturing process. Tan has been focusing on 14A, shifting away from 18A, a technology that his predecessor Pat Gelsinger had spent billions of dollars to develop.
“The foundry segment remains the biggest drag on financials with consistent execution failures,” Lee noted, adding that “Intel has also raised doubts about the viability of its 14A node amidst a lack of external customers after scrapping 18A for external customers recently.”
Intel also went for a sweeping workforce reduction to cut down costs.
Over the last two years, Intel has beaten EPS estimates 63% of the time and has beaten revenue estimates 75% of the time.
Over the last three months, EPS estimates have seen three upward revisions, compared to 24 downward revisions, while revenue estimates have been revised upwards 30 times versus two downward moves.
The stock has risen nearly 87% so far this year, outperforming the about 15% rise in the broader S&P 500 Index.