
Intel's chip contracting plan in spotlight on earnings day
(Reuters) -Faced with slumping quarterly sales and a burgeoning loss, Intel shareholders will want to know new CEO Lip Bu-Tan's plans for the chipmaker's nascent contract manufacturing business.
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, andmight 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 onshedding 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 fromU.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.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sayantani Ghosh and Arun Koyyur)
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


The Star
an hour ago
- The Star
Lend SMEs a hand, govt urged
Groups: Incentives among ways to help them manage minimum wage hike impact PETALING JAYA: While implementing the RM1,700 monthly minimum wage order is a commendable move by the government, experts and business groups are concerned whether the higher cost will be passed down to consumers. They also said the government should assist struggling small and medium enterprises (SMEs) to cope with the minimum wage order, which takes effect on Aug 1. Economist Dr Yeah Kim Leng said SMEs that are generating adequate revenue should be able to shoulder the wage increase, though some breathing space should be provided to industries to help them cope temporarily amid global uncertainties due to geopolitical conflicts. 'To retain productive workers, most enterprises are already paying above the minimum wage. 'For firms and businesses with a large workforce, the cost impact will be material and we may see the higher wage cost passed on to consumers,' said Yeah, who also argued that promoting Progressive Wage Policy (PWP) when companies are grappling with all-round cost increases is academic at this point. The ultimate goal, he said, is to achieve the desired virtuous circle of high wage income leading to high consumption, creating in return demand for products and services provided by enterprises. 'Continuous engagement with industry players is crucial to ensure systemic negative effects are addressed quickly with targeted support and measures as well as safeguards against creating market distortions and dependencies,' he said. Malay Businessmen and Industrialists Association of Malaysia president Mohd Azamanizam Baharon said the minimum wage policy could boost living standards and economic growth. 'However, many micro and small businesses remain burdened by rising utility costs, raw material prices and ongoing economic uncertainties. 'To help MSMEs adapt, Perdasama calls on the government to provide targeted incentives, accessible financing, automation and digitisation support, and enhanced supply chain development,' he said. Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) secretary-general Datuk Jeffery Tan said the government should assist businesses to cope with the increase in labour cost. 'In big cities, hiring local staff at the minimum wage is difficult. 'However, in states with more rural areas, this will definitely impact the cost of living. 'This is why ACCCIM had always asked that the government localise the minimum wage based on location. If we keep increasing the minimum wage while productivity lags behind, it will affect our competitiveness,' he said. Tan hopes the government will provide more automation and digital grants to assist SMEs to further automate and digitalise. 'Thirdly, we also hope the government will postpone the implementation of the 2% EPF contribution for foreign workers, the petrol subsidy rationalisation, and the foreign worker multi-tier system,' said Tan, who is also president of the Klang Chinese Chamber of Commerce and Industry. SME Association president Chin Chee Seong echoed similar sentiments, saying that the slew of cost increases will pose as a challenge to businesses. 'With the SST, there is an increase in cost, on top of the increase in electricity tariffs. I do not foresee businesses being able to implement progressive wages in such a climate,' said Chin. Federation of Chinese Associations Sarawak president Datuk Richard Wee said it is possible that many SMEs and micro businesses will shut down with the full enforcement of the new minimum wage. 'As for the expansion of SST, it will definitely affect businesses as a whole as it will have a cascading impact, given that products and the supply chain are closely connected to each other to the extent that even if the product may be exempted, the services related to the supply of the product are still subject to SST. 'The government should get over political considerations and re-implement GST as most countries have GST, which is considered a more efficient and progressive tax system,' said Wee. Industries Unite MCO2.0 group coordinator Datuk Irwin Cheong said the government should relook at the different segments of industry rather than sweeping across the board as workforce in multinational firms are bigger than those in small enterprises. 'Wages should be based on the agreed upon measurements, improvement benefits, different level compensation plans, and may also outperform the basic minimum wage option. 'One of the larger block of smaller enterprises may have to fork out an even higher increment into their overall cost and expenses as they too hire local workers, TVET graduates and school leavers,' said Cheong. On July 22, the Human Resources Ministry announced that the Minimum Wage Order will take effect Aug 1 for all employers regardless of the number of their employees. The ministry said the new rate announced in Budget 2025 has been in force since Feb 1 for employers with five or more employees, as well as for those conducting professional activities classified under the Malaysia Standard Classification of Occupations 2020.


The Star
an hour ago
- The Star
Google parent Alphabet surprises with capital spending boost after earnings beat
(Reuters) -Alphabet on Wednesday cited massive demand for its cloud computing services as it hiked its capital spending plans for the year to about $85 billion and predicted a further increase next year. The search giant strongly beat Wall Street estimates for quarterly revenue and profit on the back of new AI features and a steady digital advertising market. Revenue growth was driven by Google Cloud's sales, which surged nearly 32%, well above estimates for a 26.5% increase. "With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures." CEO Sundar Pichai said in an earnings release. Shares of the company, which have risen more than 18% since its previous earnings report in April, dipped initially in extended trading after the report before rallying as executives shared details about strong cloud demand on a call with analysts. But investors were surprised by the planned capital spending increase. "I don't think anyone was expecting a change to that 2025 capex guide," said Dave Wagner, portfolio manager at Aptus Capital Advisors. "Google had an amazing quarter. It was an easy beat, and it was just offset by this $10-billion increase in capex." Capital spending is expected to increase further in 2026 due to demand and growth opportunities, Chief Financial Officer Anat Ashkenazi said on the call. Ashkenazi added that while the pace of server deployment hasimproved, Alphabet continues to face more customer demand for its cloud services than it can supply. Google had earlier pledged about $75 billion in capital spending this year, part of the more than $320 billion that Big Tech is expected to pour into building AI capabilities. CLOUD GAINS The rise of artificial intelligence technologies has propelled demand for cloud computing services. Google Cloud still trails Amazon's AWS and Microsoft's Azure in total sales, but hastried to gain ground by touting AI offerings, including its in-house TPU chips that rival Nvidia's GPUs. The business segment grew its quarter-over-quartercustomer count by 28%, Pichai said on the call. "The comprehensiveness of our AI portfolio, the breadth of our offerings, both providing our models on GPUs and TPUs for our customers, all of that has been really driving demand," he said. In a huge win for Alphabet, ChatGPT maker OpenAI recently added Google Cloud to its list of cloud capacity suppliers, as Reuters exclusively reported in June, in a surprising collaboration between two companies that are competing head-to-head in AI. It also marked OpenAI's latest move to diversify beyond its major backer Microsoft. The capex increase nevertheless raises concerns about Alphabet's pace of monetization and its impact on near-term profitability, senior analyst Jesse Cohen said. Alphabet and its peers have defended their aggressive AI spending amid rising competition from Chinese rivals and investor frustration with slower-than-expected payoffs, saying those massive investments are necessary to fuel growth and improve their products. AI RACE Google Search's artificial intelligence features such as AI Overviews and AI Mode are also helping the company boost engagement and tackle rising competition from chatbots such as ChatGPT that have surged in popularity. AI Mode has grown to 100 million monthly active users just two months after Google announced the start of its large-scale rollout during its annual developer conference. Google's own ChatGPT competitor, called Gemini, has more than 450 million monthly users, Pichai said. Google's advertising revenue, which represents about three-quarters of the tech major's overall sales, rose 10.4% to $71.34 billion in the second quarter, beating expectations for $69.47 billion, according to data from LSEG. "Hopefully, this will damper concerns by the investment community that has been worried that products like OpenAI/ChatGPT could be having an impact on Google's Search query growth," said Dan Morgan, senior portfolio manager at Synovus Trust. Alphabet reported total revenue of $96.43 billion for the second quarter ended June 30, compared with analysts' average estimate of about $94 billion, according to data compiled by LSEG. The company reported profit of $2.31 per share for the period, beating estimates of $2.18 per share, according to LSEG data. (Reporting by Deborah Sophia in Bengaluru and Kenrick Cai in San Francisco; Editing by Devika Syamnath and Rod Nickel)


The Star
an hour ago
- The Star
T-Mobile raises forecast for annual subscriber additions
FILE PHOTO: A T-Mobile logo is seen on the storefront door of a store in Manhattan, New York, U.S., April 30, 2018. REUTERS/Shannon Stapleton/File Photo (Reuters) -T-Mobile raised its annual forecast for postpaid net customer additions on Wednesday and added more wireless subscribers than expected in the second quarter, signaling steady demand for the telecom giant's top-tier mobile services. Shares of the Bellevue, Washington-based company rose 3.5% in extended trading. The carrier now expects to add between 6.1 million and 6.4 million subscribers in 2025, compared with its prior projection of 5.5 million to 6 million additions. Telecom operators in the U.S. have boosted their plans with attractive trade-in deals and price guarantees to fend off competition as they grapple for a shrinking pool of new users. T-Mobile's postpaid Experience plans, which bundle streaming services such as Netflix and Apple TV+, come with a five-year price guarantee for customers. Its aggressive promotions and add-on perks have helped the company maintain an edge over rivals and increase its market share. It added 830,000 postpaid phone customers in the second quarter, surpassing FactSet estimates of 700,300 additions. T-Mobile, the last among the big three U.S. telecom carriers to report results, posted second-quarter total revenue of $21.13 billion, beating analysts' estimates of $21.02 billion, according to data compiled by LSEG. Rival AT&T beat quarterly profit estimates on Wednesday and added more wireless subscribers than expected, while Verizon raised the lower end of its annual profit forecast on Monday. (Reporting by Juby Babu in Mexico City; Editing by Devika Syamnath)