Intel Faces 7% Revenue Drop, Foundry Uncertainty Ahead of Earnings

Intel Corporation, a prominent semiconductor manufacturer, is grappling with uncertainties surrounding its foundry business, prompting analysts to adopt a cautious stance ahead of its second-quarter earnings report, scheduled for release after the market closes on Thursday. Market projections indicate that Intel's second-quarter revenue will amount to $119.3 billion, reflecting a 7% year-over-year decline. The adjusted net profit is expected to be $74.5 million, with earnings per share at $0.02, compared to $83 million and $0.02 per share in the same period last year. The foundry division's revenue is anticipated to decrease by 7% to $3.98 billion.

Analysts are closely scrutinizing Intel's foundry business, which has become a significant area of interest for investors. Reports suggest that the newly appointed CEO, Pat Gelsinger, is contemplating changes to the company's chip manufacturing operations. This potential shift could lead to Intel writing off billions of dollars in chip manufacturing technology, classifying it as an impaired asset. Such a move might alter the division's manufacturing processes to attract major clients like Nvidia and Apple. A recent analysis suggests that this strategy could mark the beginning of a challenging transition from foundry services to product-focused operations. While this shift may be strategically sound, it presents significant operational challenges.

One prominent financial institution has raised its target price for Intel from $21 to $25, maintaining a "hold" rating. Meanwhile, another major investment firm has kept its target price for Intel at $19, while a third firm has maintained a target price of $22, both with "hold" ratings. These firms are cautious about Intel's future prospects, given the uncertainties surrounding its foundry business.

As part of its restructuring plan, Intel has begun laying off thousands of employees in Oregon. This move is part of a broader effort to streamline operations and focus on more profitable areas of the business. The company's stock has seen a 15% increase year-to-date, closing at $23.10 on July 18. However, the upcoming earnings report will be crucial in determining whether this positive momentum can be sustained.