Intel Q2 2021 Earnings Fail To Impress Investors Even With a Broad Beat On Revenue and EPS

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Intel (NASDAQ:INTC) is announcing its earnings for the second quarter of 2021 today, allowing investors to acquire much-needed clarity on two critical issues: customer inventory digestion and an update on the release timeline of its 10nm-based Sapphire Raid Xeon chips. While the earnings call will provide a much more in-depth outlook, financial guidance numbers in the earnings release can play an important role in determining the stock’s short-term direction.

Intel (NASDAQ: INTC) Earnings Release for the Second Quarter of 2021

For the three months that ended on the 30th of June 2021, Intel reported $18.5 billion in non-GAAP revenue. The number marks an increase of 3.9 percent relative to consensus expectations.

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(All figures are in billions of dollars)

Before analyzing Intel’s segmental revenue for the quarter, readers should note the consensus expectations (sourced from BusinessQuant) regarding the company’s business units:

(All figures are in billions of dollars)

Here is the performance of Intel’s business segments in Q2 2021:

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As is evident from the snippet above, Mobileye led the pack with 124 percent growth. DCG was the biggest disappointment, recording an annual decline of 9 percent.

The following excerpt from the company's earnings release provides supplemental platform revenue information:

Intel's other key financial metrics are as follows:

(All figures are in billions of dollars)

Finally, Intel earned $1.28 in EPS (non-GAAP), beating consensus expectations by over 19 percent.

(All figures are in dollars)

 

As far as the guidance for Q3 2021 is concerned, Intel expects to earn a non-GAAP revenue of $18.2 billion and non-GAAP EPS of $1.10. Moreover, Intel expects its gross margin to compute at 55 percent (on a non-GAAP basis) during the third quarter of 2021. For the entire FY 2021, Intel now expects to earn $73.5 billion in non-GAAP revenue.

As far as Intel's product line is concerned, the company noted in its press release:

  • Announced a $3.5 billion investment to equip Intel’s New Mexico operations for the manufacturing of advanced semiconductor packaging technologies, including Foveros.
  • Launched 12 new processors for client, including 11th Gen Intel Core with Intel® Iris® Xe graphics and Intel® Xeon® W-11000 series processors with more than 300 designs expected this year.
  •  Unveiled the Intel Network Platform and expanded networking leadership product portfolio with new FPGA, software, and Ethernet solutions.
  • Mobileye and ZF were selected by Toyota Motor Corp to develop advanced driver assistance systems.

  • Announced Mobileye as the only company holding an autonomous vehicle testing permit in New York.

Source

Investors have reacted negatively to Intel’s latest earnings release, with the stock registering a loss of a little over 1 percent during after-hours trading. Bear in mind that the company did manage to soundly beat consensus expectations.

Earnings Context

As stated earlier, Intel’s sales have been suffering lately as its customers digested elevated inventory levels. The earnings call will provide additional clarity on this front. Moreover, Intel had delayed the release of new 10nm-based Sapphire Raid Xeon chips to 2022 from the end of 2021. The commentary by the company’s management can shed light on whether the company is adhering to this timeline.

Readers should note that the semiconductor industry is currently going through a consolidation phase, and Intel seems bent on taking full advantage of this ongoing trend. A few weeks back, Bloomberg reported that Intel had offered around $2 billion to acquire the fabless semiconductor SiFive, a provider of commercial RISC-V processor IP and silicon solutions based on the RISC-V instruction set architecture. Just last week, Wall Street Journal had reported that the company was engaged in buyout talks with the Abu Dhabi-based Mubadala Investment to acquire GlobalFoundries, the chipmaker that constituted AMD’s (NASDAQ:AMD) fab division and was spun off around three years back. However, that report was later vehemently denied by Tom Caulfield, the CEO of GlobalFoundries.

Intel is seeking to enhance its chip fabrication footprint as part of the IDM 2.0 strategy. To this end, the company has formed a completely separate business unit called the Intel Foundry Services (IFS). The IFS seeks to expand Intel’s foundry footprint in the US and the EU by providing committed capacity and a comprehensive IP portfolio, including x86 cores as well as ARM and RISC-V ecosystem IPs. Moreover, the chipmaker is investing $20 billion to build two new fabs at its Ocotillo facility in Arizona.

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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