Intel plummets 11% on manufacturing and data-center revenue weaknesses

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Intel

One of the biggest losers on Friday’s markets happened to be the well-known chipmaker Intel (NASDAQ: INTC). Despite the fact that the coronavirus pandemic has seen a surge in demand for computer parts and chips, Intel has been struggling amidst issues with its manufacturing. While investors and shareholders were well aware of this already, the company’s recent Q3 results confirmed that these issues are here to stay for the time being, while also reporting on new problems worth worrying about.

Overall revenue had declined by 4% to $18.3 billion, despite strong sales during the first half of the year. While PC part demand remains strong, the main red flag for shareholders was the company’s sudden 7% drop in data-center revenue, which accounts for around $5.9 billion of Intel’s total quarterly revenue.

The main reason for this shift seems to be big customers moving away from physical data centers to cloud service providers. While Intel has its own cloud computer group that will benefit from this change, investors are more worried about an immediate loss in cash than a potential upside years from now.

We delivered solid third-quarter revenue and profitability, despite increasing COVID-driven headwinds affecting significant portions of our business. Led by strong consumer notebook demand and continued cloud growth, we generated $18.3 billion in revenue and delivered $1.11 in EPS,” said CEO Bob Swan in a prepared comment. “We exceeded our topline expectation by $133 million dollars and our bottom-line expectation by one cent. I am incredibly proud of our employees’ performance through these challenging conditions.”

Shares of Intel ended up falling around 11% over the course of Friday’s trading session, with the stock still inching downwards in premarket trading. Since the beginning of this year, Intel is down around 20%, severely underperforming not just the Nasdaq but the market as well.

In comparison, other chipmakers, such as AMD, have seen their stock prices surge as they moved in to fill in the gap left behind by the now struggling Intel. Another company that’s doing extremely well, Nvidia, has also seen its stock surge, with Intel’s decline giving the company room to capture market share also.

Over the long-term, however, it seems likely that Intel will stabilize itself once again, its just a question of when. Most analysts remain either neutral or bullish on the stock, but definitely agree that there could be a lot more turbulence ahead for Intel in the months to come.

 

Intel Company Profile

Intel is one of the world’s largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It is also the prime proponent of Moore’s law for advances in semiconductor manufacturing. While Intel’s server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, recently acquiring Altera, Mobileye, Nervana, and Movidius in order to assist its efforts in non-PC arenas. – Warrior Trading News

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