Wall Street awaits Intel’s turnaround update
The struggling American chip icon is due to report Q2 numbers after the close.
Wall Street is eagerly awaiting earnings from Intel after the close Thursday, with analysts and shareholders hoping that newly installed CEO Lip-Bu Tan, who took over in March, will offer some tangible evidence that a turnaround is afoot.
The company's Q1 report was a dour affair, with the company warning that there would be no earnings-per-share profit in Q2 and offering a weaker-than-expected outlook for sales. Beyond announcing a major job- and cost-cutting push, Tan gave few indications of significant strategic shifts for the company, which some analysts found concerning.
The stock fell about 7% the next day. (Over the last year, Intel is down roughly 30%, while the S&P 500 is up 17%. The S&P 500 semiconductors subindex is up a tidy 40%.)
There is some reason for optimism. Analysts expect that sales in the company’s business supplying chips to PC makers to be decent because of a surge of consumer purchases and inventory stocking aimed at getting ahead of any tariffs from President Trump. Meanwhile, previously announced cost cuts could boost cash flow in the short term, giving Intel and Tan a bit more financial room to maneuver.
But the company still faces a series of major choices with huge financial implications.
What should Intel do with its struggling foundry business, where it acts as a contract manufacturer of semiconductors for other chipmakers? Wall Street analysts have hinted heavily that they’d like to see it spun off.
Or should Intel shift the foundry business from making chips with a manufacturing process known as 18A to the next-generation fabrication process known as 14A? The 18A fabrication process cost billions to develop and had been championed by Tan’s predecessor. Shifting away from it would likely result in costly write-down losses. But recent reports indicated such a shift was being considered, with Intel weighing a move toward focusing on the next-generation 14A fabrication process, where it might be more competitive with market leader TSMC.
Perhaps the most pressing strategic question is whether Intel has a plan to somehow claw its way into the massive semiconductor AI boom, where chip makers like Nvidia and Broadcom are running the table.
It’s unlikely that Tan will be able to conclusively answer all of those questions in today’s post-earnings conference call. And he still has time and credibility with Wall Street, largely because of his remarkable track record.
But the clock is ticking.
