Photo Credit: Alice Bevan–McGregor

Intel Corporation (INTC) Information Technology - Semiconductors | Reports October 18, After Market Closes

Intel is scheduled to announce its third quarter results Tuesday after the market closes. It is one of the first large cap tech reports this season and will likely set the tone for the remaining companies in the tech and semiconductor space. Earnings have consistently topped expectations while revenue is starting to show signs of weakness. Weak PC sales and IT spending have been the biggest headache that has pressured top line growth. The company doesn’t expect this to be as big of an issue this quarter which means investors should prepare for a beat.

Analysts at Estimize are calling for earnings per share of 74 cents, roughly 12% higher than the same period last year. That estimate has climbed 13% since Intel’s most recent report in July. Revenue for the quarter is estimated 6% higher at $15.57 billion, a significant improvement from the 3% posted in Q2. Historically shares have declined through earnings but eventually flatten a month about 30 days following a report. 

Intel, like many of its peers, has shifted its focus away from its waning legacy business toward high growth markets such as AI, IoT Data Centers and Security. Last quarter the company saw these segments jump on a year over year basis with expectations to do the same on Tuesday. Client Computing was one of the lone sore spots in the second quarter report, declining 3% on a sequential and year over basis. While it’s safe to remain cautious about the PC market, management expects PC related sales to show some improvement this quarter.

Intel faces a number of imminent threats that could put pressure on earnings for multiple quarters. Google, IBM and seven others have joined hands to take on Intel’s Data Center Group. The consortium includes many large well known companies and some smaller ones. Its impact on Intel remains to be seen but management would be wise to not take it lightly. Meanwhile, Apple is rumored to be replacing Intel chips in all of its Macbooks. This would be a near term blow but not one that would significantly cripple the company.

Currency headwinds and economic uncertainty in Europe are amongst the broader concerns facing the tech space, Intel included. Intel has a large presence worldwide which means they are susceptible to compressed earnings from the strong dollar. It appears as though more factors are working against Intel then for them, despite increasing optimism heading into its report.