Intel Beats Revenue Expectations, Expects Strong Q3 Growth
Intel (INTC), the American multinational corporation specializing in semiconductor manufacturing, has exceeded revenue expectations for the second quarter of 2021. The company reported adjusted earnings of 13 cents per share on $12.9 billion in revenue, surpassing analysts’ consensus of an expected loss of 3 cents per share on $12.14 billion in revenue.
Intel’s Client Computing Group played a significant role in this success, benefiting from strong demand for Chromebooks and high-end notebooks. The group generated $6.78 billion in revenue, surpassing estimates and reflecting Intel’s ability to gain market share. KeyBanc Capital Markets analyst John Vinh, who maintains a sector-weight rating on Intel shares, highlighted the positive impact of healthy inventories and robust third-quarter shipments tracking consumption data.
The results also had a ripple effect on Intel’s biggest competitor in the PC space, AMD (AMD), which saw a nearly 2% increase in pre-market trading.
However, it was not all positive news for Intel, as revenue attributed to its Data Center and AI group decreased by 15% to $4 billion. Similarly, Network and Edge revenue dropped by 38% to $1.4 billion. Nevertheless, Intel’s nascent foundry unit experienced a significant surge in revenue, up 307% to $232 million.
Looking ahead, Intel is optimistic about its performance in the third quarter. The company expects revenue to be between $12.9 billion and $13.9 billion, with the mid-point surpassing the estimated $13.28 billion. It also foresees adjusted earnings of 20 cents per share, exceeding analysts’ predictions of 13 cents per share.
Commenting on Intel’s results, TD Cowen analyst Matthew Ramsay commended the Client Computing group’s performance and suggested that the guidance provided by the company could allow it to regain momentum. Ramsay raised his price target on Intel shares to $38 from $31, underscoring the positive outlook.
J.P. Morgan analyst Harlan Sur, who has an underweight rating on Intel shares, acknowledged that the business is entering a gradual recovery phase. Despite some weak aspects, particularly Networking and Edge, Sur expressed satisfaction with Intel’s execution. He emphasized the need for the company to demonstrate high volume production and shipments of its Meteor Lake (PC client) and Emerald Rapids (server) platforms in the second half of this year. Sur raised his price target on Intel shares to $35 from $30.
In summary, Intel’s second-quarter earnings have exceeded expectations, boosted by strong performance in the Client Computing Group. The company’s ability to seize market share and healthy inventories has contributed to this success. While challenges remain in the Data Center and AI group, Intel’s overall execution has been praised, with analysts believing the company is well-positioned for a gradual recovery.
