Dear Intel Stock Fans, Mark Your Calendars for July 24
Fast forward to mid-2024, and that dominance has taken a hit. While Intel still leads, its desktop CPU share has dipped below 80%, and its server share has dropped to around 75%. With AMD stepping up its game and launching top-tier chips, Intel's once-firm grip on its core business is starting to loosen. A significant part of Intel's downfall also stems from its cautious approach.
With a market capitalization of roughly $101.5 billion, California-based Intel has been a dominant force in the PC processor market for decades. Back in 2017, Intel was the undisputed king of CPUs, commanding nearly 90% of the desktop market and more than 98% of the server space. With in-house manufacturing as a key advantage, the company looked unstoppable.
With all these factors in play, as the company prepares to report its second-quarter earnings on July 24, the spotlight is on whether Intel's aggressive restructuring strategies under new leadership are finally beginning to bear fruit. The results will provide a key look at the extent of Intel's actual progress in its turnaround journey in an increasingly competitive chip market.
But after a bruising year, the tide may finally be turning for the chip giant in 2025. Since former board member Lip-Bu Tan stepped in as CEO in March, Intel's stock has started to show signs of life. Tan has moved quickly to cut costs, reduce headcount, and shake up the company's layered structure. The goal is to transform a sluggish giant into a faster, leaner contender in a chip industry that's evolving at lightning speed.
Once a towering name in the semiconductor world, Intel (INTC) has seen its shine fade in recent years. Investor sentiment cooled as the company lost ground to fast-moving rivals like Nvidia (NVDA) and Advanced Micro Devices (AMD). A series of missed opportunities in the artificial intelligence (AI) space, combined with a costly and uncertain bet on expanding its foundry business, only deepened the decline, dragging the stock lower throughout 2024.
Story Continues
After plunging 30% over the past year and falling well behind the S&P 500 Index's ($SPX) 13.2% gain during that same period, 2025 has brought a fresh wave of optimism. With a new CEO at the helm and hopes building around a potential turnaround, the stock has staged an impressive comeback. So far this year, Intel is up 16.7%, easily outpacing the broader market's 7.1% rise.
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Intel's Q1 Earnings Snapshot
In April, Intel kicked off the first quarter of fiscal 2025 with revenue of $12.67 billion, roughly flat year-over-year (YOY), but slightly ahead of the $12.34 billion Wall Street had expected. It also marked the first earnings report under new CEO Lip-Bu Tan, who took the reins earlier this year following Pat Gelsinger's departure amid pressure from the board and investors. That said, Intel's Q1 performance painted a mixed picture across its major business segments.
The data center group reported $4.1 billion in sales, marking a solid 8% annual increase, a bright spot in an otherwise uneven quarter. Meanwhile, the company's ambitious foundry business, seen as a key pillar of its future strategy, posted $4.7 billion in revenue, up 7% YOY. However, Intel's core PC chip business, reported under the Client Computing Group (CCG) segment, continued to face headwinds, with revenue slipping 8% to $7.6 billion amid soft consumer demand and intense competition.
On the profitability front, pressure remained evident. Gross margin contracted to 36.9%, a 4.1 percentage point decline from the prior year, driven by shifts in product mix and elevated production costs. Adjusted net income dropped a notable 23.6% to $580 million, while adjusted EPS fell to $0.13 from $0.18 in Q1 of fiscal 2024. Still, the reported figure was a solid beat against Wall Street's projection of just $0.01 per share.
Intel investors are counting on CEO Lip-Bu Tan to revive a company that's been steadily losing ground in its core processor business and struggling to compete in the red-hot AI chip space dominated by Nvidia. While reflecting on the Q1 performance, CEO Lip-Bu Tan noted, 'The first quarter was a step in the right direction, but there are no quick fixes as we work to get back on a path to gaining market share and driving sustainable growth.'
Dear Intel Stock Fans, Mark Your Calendars for July 24
Under its new leadership, Intel is tightening the reins on spending as it sharpens its focus on execution and efficiency. The company is streamlining its structure, eliminating management layers, and empowering its engineering teams to accelerate product development and enhance accountability. As part of the overhaul, Intel lowered its fiscal 2025 non-GAAP operating expense target to $17 billion from $17.5 billion and set a new goal of $16 billion for fiscal 2026.
On the capital front, Intel lowered its gross capital expenditures target for 2025 to $18 billion, down from $20 billion previously, thanks to improved asset utilization and operational efficiencies. Looking forward to the company's Q2 results, which is scheduled to be released after the market closes on July 24, management expects revenue to land between $11.2 billion and $12.4 billion, while GAAP loss is projected to come in at $0.32 per share.
Intel's near-term outlook remains cautious, with analysts expecting the company's Q2 GAAP loss to hold steady YOY. However, sentiment improves further out. Wall Street is projecting a 64.7% reduction in annual losses for fiscal 2025, signaling progress on cost-cutting and operational improvements. Even more encouraging, analysts forecast the company to return to profitability in fiscal 2026, with expected GAAP earnings of $0.15 per share.
What Do Analysts Expect for Intel Stock?
Overall, Wall Street is treading carefully with Intel, maintaining a cautious 'Hold' consensus as analysts wait for more concrete progress in the company's turnaround story. Of the 38 analysts offering recommendations, only one advocates a 'Strong Buy' rating, a majority of 32 give a 'Hold,' while the remaining five maintain a 'Strong Sell' rating.
The stock is presently trading slightly higher than its average analyst price target of $22.68. However, the Street-high price target of $62 implies that INTC can rally as much as 168.4% from its current level.
www.barchart.com
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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