Why Intel Stock Was Tumbling Today

11 days ago

Motley Fool

Shares of the chip giant fell on disappointing guidance.

Shares of Intel (INTC -9.20%) were taking a dive on Friday after the semiconductor giant offered a disappointing forecast for the second quarter, confirming fears that it's still missing out on the artificial intelligence (AI) boom.

As a result, the stock was down 9.7% as of 1:47 p.m. ET.

Intel beat estimates, but Q2 looks weak

For the first quarter, Intel reported a 9% increase in revenue to $12.7 billion, well ahead of estimates at $11.9 billion. Revenue growth in its PC-focused client computing group bounced back, rising 31% to $7.5 billion, though the data center and AI segment was weak, with revenue up just 5% to $3 billion.

In part due to easy comparisons with a sluggish quarter a year ago, gross margin rose 6.8 percentage points to 41%, and the company also reversed an operating loss from a year ago, finishing the quarter with adjusted earnings per share of $0.18, which topped expectations at $0.13.

CEO Pat Gelsinger said, "We are making steady progress against our priorities and delivered a solid quarter," adding, "We are confident in our plans to drive sequential growth throughout the year as we accelerate our AI solutions and maintain our relentless focus on execution, operational discipline, and shareholder value in a dynamic market."

Profits remain elusive

Investors hoping that the launch of the Gaudi 3 AI GPU would improve profitability were clearly disappointed with the second-quarter guidance.

Intel expects revenue of $12.5 billion-$13.5 billion in the current quarter, which represents flat growth at the midpoint, but was better than the consensus at $12.7 billion.

On the bottom line, Intel sees adjusted earnings of just $0.10, down from $0.25 in the quarter a year ago and well below the consensus at $0.24. It also expects a generally accepted accounting principles (GAAP) loss in the quarter.

Intel has talked up its prospects in AI and its foundry services, but until the company can show it's executing and delivering meaningful improvements on the bottom line, the stock is likely to struggle. At this point, Intel stock looks best avoided.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.