By Senad Karaahmetovic
Intel (NASDAQ:INTC) stock is trading about 7% in the green after the chipmaker delivered better-than-feared results and committed to aggressively slash costs.
Intel posted an EPS of $0.59 on revenue of $15.3 billion, beating the consensus of $0.34 on sales of $15.43 billion. The adjusted operating margin came in at 10.8% to top the analyst estimate of 10.4% while the adjusted gross margin missed expectations.
"Despite the worsening economic conditions, we delivered solid results and made significant progress with our product and process execution during the quarter. To position ourselves for this business cycle, we are aggressively addressing costs and driving efficiencies across the business to accelerate our IDM 2.0 flywheel for the digital future,” said Pat Gelsinger, Intel CEO.
For this quarter, Intel said it expects an adjusted EPS of $0.20 on revenue in the range of $14-15 billion, missing the consensus for EPS of $0.20 on sales of $16.29 billion.
Intel also slashed its full-year forecast so that it now expects revenue between $63 billion and $64 billion, down from the prior outlook of $65 billion to $68 billion. Analysts were expecting a full-year revenue forecast of $65.64 billion, according to Bloomberg.
The full-year adjusted EPS is now seen at $1.95, down from the prior $2.30 and below the $2.19 consensus. The adjusted gross margin should come in at 47.5%, instead of the prior 49%, and again missing the 48.9% estimate.
Intel said it estimates full-year capex at $21 billion, down from the prior $23 billion. The chipmaker committed to slashing $3 billion worth of costs in 2023. It also offered a forecast for cost reductions to $8-10 billion annually by the end of 2025.
Summit Insights analysts upgraded Intel shares to Buy on the belief that the company’s financial performance will improve through 2023.
“Our industry checks indicate share loss in its MPU business has moderated, and we now expect minimal share shifts in 2023 and beyond as INTC refreshes its MPU product lines. While we think it may take at least 3-4 years before INTC can become a meaningful player in the advanced foundry market, we think INTC has laid down a solid foundation to take share in this market segment. Thus, we advise longer-term investors to look for an entry point for the stock,” they wrote.
Rosenblatt analysts reiterated a Sell rating as they believe Intel “will continue to be structurally challenged for the foreseeable future.”
“Intel’s business model will be challenged with multiple years of share losses in data center regardless of a recovery in the PC market. With no defense mechanisms in place in the data center, we see AMD at least quadrupling its share from ~10% in 2021 in the next couple of years.”