Intel Corporation (INTC) Caught Off Guard Expecting Another Big Beat in Q3

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Intel reports third quarter earnings showing an unexpected dip in its data center segment leading the stock price to plunge 12% on Friday. 

Intel Corporation (INTC) beats the estimated third quarter earnings but lags in the data center segment which has made the stock plunge in the market on Friday. 

Shares of Intel have dropped up to 12% today after the company revealed its third quarter results on Thursday. Despite the fact that Intel’s third quarter earnings report surpassed Wall Street’s estimates beating the expected EPS of $1.10 as the company recorded $1.11. The revenue was estimated to be around $18.25 billion, which the company crossed reporting $18.33 billion. 

What became the reason for the stock to dip in the market after beating consensus estimate? The point which led the shares price to fell in the recent trading session was the new weakness that emerged in Intel’s data center business.

The third quarter earnings report showed that Intel’s Data Center Group recorded a 7% decline in its revenue at $5.91 billion, which was lower than the FactSet consensus estimate of $6.21 billion. The revenue from enterprises and governments dipped 47% due to COVID-19 pandemic. However, the cloud revenue grew 15% in the quarter. Also, the average selling price across the segment plunged 15% compared to the same quarter last year. 

Yahoo Finance’s, Jared Blikre highlighted that the reason why Intel did not enthuse its investors was updating nothing on the projection of its 7-nanometer chipset. Blikre said:

“We still have to get on the call, but I suspect some of it might have to do with I’m not seeing anything regarding projection for their 7-nanometer. That’s basically the distance of the chipset here. And it’s a particular technology that they’ve really fallen behind on in their race with AMD.”

Blikre added that AMD is quite ahead of Intel as far as the 7-nanometer chipset is concerned. Currently, Intel is planning to ship 30% higher 10-nanometer product volumes in 2020 but there is nothing on the 7-nanometer chipset. And that is making the market a bit concerned about the company. 

The executives of the company in July highlighted that the company was evaluating how it might begin relying on other companies to manufacture its chips, and on Thursday Intel’s CEO, Bob Swan commented that they should be able to describe this decision in January 2021.

Highlighting the next quarter guidance, Intel Corporation (INTC) anticipates its adjusted EPS to be $1.10 on $17.4 billion in revenue, showing a 14% decline in revenue. 

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