Intel's chip contracting plan in spotlight on earnings day
Intel is set to report its sixth consecutive net loss on Thursday, while revenue is expected to drop for a fifth straight quarter, according to estimates from LSEG data.
The storied chipmaker, once synonymous with America's chipmaking heft, has lagged due to years of strategic missteps.
Rival Nvidia has leaped ahead in the booming artificial intelligence chip industry, while rival AMD has been gaining share in Intel's mainstay personal computer and server semiconductor markets.
CEO Tan has been focusing on a next-generation chipmaking process called 14A to win big external customers, shifting away from 18A, a technology that his predecessor Pat Gelsinger had spent billions of dollars to develop.
Such a move could lead to a big writedown, an expense that would surely displease investors even as Intel has signaled that the new technology will help it be more competitive against Taiwan's TSMC, the world's biggest chipmaking factory.
Longer-term commentary on the company's plans for the 14A technology "will hold more weight this earnings call than anything else", Stifel analysts wrote ahead of the earnings.
Intel is expected to report a net loss of about $1.25 billion for the April-June quarter, while its sales are expected to drop more than 7% to $11.92 billion. Last year was Intel's first unprofitable year since 1986.
Writedowns could amount to hundreds of millions, if not billions, of dollars, according to analysts, and might impact the timeline for the foundry to break even.
Intel's finance boss David Zinsner said in May he expected the unit to break even in 2027 and that would require external customers to generate low- to mid-single-digit billions in revenue.
Intel's foundry unit is expected to generate $4.49 billion in sales in the second quarter, though a majority of this would come from chips Intel produces for itself, analysts said.
Streamlining
Since taking over as CEO in March, Tan has focused on shedding non-core assets. In April, Intel agreed to sell a 51% stake in its Altera programmable chip business for $4.46 billion. The company has also considered divesting its network and edge businesses as well.
Intel's stock has risen 16% so far this year, compared with a 13.23% rise in the broader chip index.
Investors will watch if Tan sells more assets, further flattens out the management structure, or expands the global layoffs the company announced last year.
Intel, as with other chipmakers, is facing customers who are dragging their feet on their spending, due to uncertainty from U.S. President Donald Trump's trade war.
Revenue at Intel's personal computer unit is expected to dip some 2% to $7.25 billion in the second quarter after customers pulled forward orders to the first three months of the year due to the threat of tariffs.
Analog chipmaker Texas Instrument flagged similar troubles on Tuesday, sending its shares down 11% after hours. Chip-equipment maker ASML and TSMC have also warned tariff-related uncertainty has muddied the outlook for them.
Revenue in Intel's data center unit, however, is expected to jump about 20% to $3.66 billion, signaling improving demand for traditional server chips after several quarters of poor sales.
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