Intel (INTC) Earnings Preview: Critical Inflection Point as Leadership Transition and Strategic Overhaul Take Center Stage
3min read As Intel prepares to report its fourth-quarter 2024 earnings, investors are looking beyond the numbers to assess the future direction of the company amid significant leadership changes and ongoing struggles in the semiconductor market. The abrupt retirement of former CEO Pat Gelsinger in December marked a pivotal moment for the company, signaling potential strategic shifts as Intel works to regain lost ground against dominant competitors like NVIDIA and AMD.
Earnings Expectations and Guidance Outlook
Intel is set to report earnings after the closing bell, with consensus estimates pointing to earnings per share of $0.12 and revenue of $13.8 billion. The company’s Q4 guidance issued in October had forecast revenue between $13.3 billion and $14.3 billion, aligning with expectations at the time.
However, given Intel’s ongoing restructuring efforts and competitive pressures, investors will pay close attention to the company’s first-quarter 2025 guidance. To meet expectations, Intel will need to project revenue of at least $12.88 billion and earnings per share of $0.09.
Leadership Transition and the Future of IDM 2.0
Perhaps the most significant development in Intel’s recent history was the departure of CEO Pat Gelsinger. While his tenure was marked by ambitious plans to transform Intel into a leading domestic semiconductor manufacturer under the IDM 2.0 strategy, execution fell short of expectations. The company struggled to gain traction in key markets, losing market share to AMD and NVIDIA while facing declining margins and operational inefficiencies.
Intel's board has not yet named a permanent replacement, instead appointing two interim co-CEOs: CFO David Zinsner and Michelle Johnston Holthaus, who was recently named CEO of Intel Products. One of the key questions going into the earnings call will be whether Intel remains committed to its IDM 2.0 vision or if leadership will shift its focus away from large-scale foundry ambitions to a more streamlined business model.
Challenges in AI and Data Center Markets
Intel has largely missed out on the booming AI-driven semiconductor market, a sector where NVIDIA and AMD have seen exponential growth. While Intel’s Data Center and AI (DCAI) division posted modest 9 percent revenue growth in the third quarter to $3.3 billion, this performance paled in comparison to the triple-digit growth rates reported by competitors.
Without a meaningful breakthrough in AI acceleration technologies, Intel risks further marginalization in a market that is rapidly shifting towards high-performance AI workloads.
The company has also faced challenges in its Foundry Services segment. While Intel has secured key partnerships, including a deal with Amazon Web Services to co-develop chips using its 18A process, the division remains a significant drag on profitability. In the third quarter, Intel’s Foundry unit reported an operating loss of $5.8 billion as the company struggled to scale its manufacturing business.
Declining PC Market and Client Computing Struggles
Intel’s Client Computing Group (CCG), traditionally its most reliable revenue driver, saw a 7 percent decline in third-quarter revenue to $7.3 billion. The global PC and laptop market, which had shown signs of recovery earlier in the year, weakened once again, impacting Intel’s performance. The company had banked on a wave of AI-driven PC upgrades to drive a new cycle of demand, but so far, the anticipated refresh has not materialized in a meaningful way.
With demand still uncertain, Intel’s ability to stabilize this segment will be crucial in mitigating losses from its weaker-performing divisions. A stronger-than-expected PC market rebound could provide some relief, but macroeconomic conditions and consumer demand will be key factors influencing this outcome.
Cost-Cutting Measures and Potential Divestitures
To navigate the downturn, Intel has implemented an aggressive cost-cutting initiative aimed at saving $10 billion. This includes a workforce reduction of approximately 15 percent and the suspension of its quarterly dividend. While these measures are intended to stabilize Intel’s financial position, they also underscore the extent of the challenges the company faces.
In addition to cost reductions, Intel has been exploring potential divestitures to streamline its business. One of the key assets under review is the Altera unit, which specializes in programmable chips used in telecom and networking applications. Selling this business could provide Intel with much-needed capital to refocus on core growth areas.
Investor Sentiment and Outlook
Intel’s stock has remained under pressure, reflecting investor skepticism about the company’s turnaround prospects. The company’s market value has eroded significantly over the past few years, and its ability to chart a clear strategic path forward will determine whether it can regain investor confidence.
As the earnings report approaches, key areas to watch include:
- The company's forward guidance for revenue and earnings in the first quarter of 2025
- Any indications of a strategic shift in Intel’s IDM 2.0 manufacturing model
- Updates on AI and data center growth initiatives and whether Intel is gaining traction in high-performance computing markets
- The state of the PC market and whether demand trends support a recovery in the Client Computing Group
- Progress on cost-cutting measures and potential divestitures
Intel stands at a critical juncture, with the outcome of its strategic realignment poised to shape its future for years to come. If the company can successfully execute a turnaround while regaining its competitive edge in AI, data centers, and semiconductors, it may still have a path to recovery. However, without clear evidence of progress, Intel risks further market share erosion, leaving it increasingly vulnerable in an industry that is evolving at a rapid pace.
