Intel Faces Scrutiny Amid Revenue Slump and CEO Search

Intel faces close investor examination as it reports quarterly results on Thursday, amidst concerns about its CEO search and declining revenue. The chipmaker anticipates a significant drop in revenue due to weak PC sales and a shrinking market share in the datacenter.

Interim Co-CEOs and Contract Chip Business

Following the departure of CEO Pat Gelsinger, Intel appointed two interim co-CEOs, Michelle Johnston Holthaus and David Zinsner. The company's plans to establish a contract chip manufacturing unit, championed by Gelsinger, have come under scrutiny. Investors seek clarity on the strategic direction for Intel's recovery.

Northland Capital's Outlook

Northland Capital maintains an "outperform" rating for Intel, estimating its share price should reach approximately $28, valuing the company at over $120 billion. This valuation exceeds its current market capitalization of $85 billion.

Market Challenges and High Costs

Intel's efforts to compete with TSMC have burdened its balance sheet and cash flow. The company's traditional design and manufacturing model has faced challenges, leading it to explore a more cost-effective "fabless" model.

Government Support

Intel holds strategic importance for the U.S. government, which seeks to maintain domestic chip manufacturing capabilities. Northland analysts believe the sum of Intel's components could exceed its current market capitalization.

Margin Pressure and Revenue Decline

Analysts forecast a decline of 9 percentage points in Intel's gross margin in the fourth quarter, to 39.4%. Revenue is expected to decrease 10.4% to $13.81 billion. Intel anticipates revenue growth of 1% in the current quarter.

Datacenter and PC Segment Challenges

Intel's datacenter revenue, primarily from server chips, is projected to drop over 15% in the fourth quarter, continuing a decline that has persisted for 11 consecutive quarters. Cloud providers have shifted spending towards specialized AI chips.

The PC segment, Intel's largest revenue generator, is also experiencing a decline of over 11% in the fourth quarter due to weak sales. Despite potential inventory stocking ahead of tariffs, analysts maintain low expectations for overall performance.