Intel Stock Drops Despite Topping Q1 Estimates

By Mariliana Fotopoulou Friday, April 23, 2021

Intel stock is trading almost 2% lower despite the fact that the tech company topped analysts’ estimates for Q1.

Intel headquarters.

Demand for Microchips Extremely Strong

Intel reported its Q1 earnings results that showed relatively flat business sales and a decline in the profit compared to a year-ago period. Therefore, Intel stock is trading lower in early trading today.

Still, business revenue and profit topped market estimates for Q1. The company reported adjusted earnings per share (EPS) of $1.39, beating the consensus estimates of $1.15, but down 1% year-on-year.

Adjusted business revenue for Q1 was reported at $18.57 billion compared to the expected $17.90, which is almost unchanged compared to last year. The company estimates $17.9 billion in business revenue in Q2, versus analysts’ expectations of $17.55 billion, to provide a further boost for Intel stock.

However, Intel’s profit expectations for Q2 were slightly lower than analysts’ estimates as the company anticipates $1.05 EPS, compared to the expected $1.09. A lower-than-expected profit is a result of the increased spending to ramp up its production capabilities.

Newly-appointed CEO Pat Gelsinger said earlier this month that his company plans to inject $20 billion in new microchip production factories and announced a plan to become a contract chip manufacturer. Intel stock soared higher on this announcement.

This means that along with making its own chips, Intel would also start making chips for other companies. However, analysts warn that the plan to become a contract manufacturer would take years to realize.

“This is a pivotal year for Intel. We are setting our strategic foundation and investing to accelerate our trajectory and capitalize on the explosive growth in semiconductors that power our increasingly digital world,” Gelsinger said.

Intel’s earnings received a boost this quarter from higher PC sales which had the best quarter in years. Semiconductor business sales used in notebook laptops hit record highs after surging 54% year-on-year, while total PC volumes soared 38% during the quarter, Intel said.

Profit in its client computing unit, including PC chips, was $10.61 billion in the quarter, compared to $9.78 billion from a year-ago period. The client computing group accounts for more than 59% of Intel’s revenue.

The majority of those laptops and PCs include Chromebooks and computers that use cheaper chips. Intel also supplies Apple; however, the US tech giant is using its own chips more and more instead of those produced by Intel.

Still, the chipmaker’s performance when it comes to PCs was robust despite Apple “ramping down,” said Intel’s CFO George Davis.

Business sales of high-performance chips used in data centers were down compared to last year as companies shifted to cloud operations amid the coronavirus pandemic. Business revenue in Intel’s data center group this quarter was $5.56 billion, compared to $6.99 last year.

Intel’s plans to increase manufacturing capabilities and become a contract manufacturer are expected to cost between $19 billion and $20 billion in capital expenditures this year.

The chipmaker said in March it was estimating an EPS of $4 and $72 billion in business revenue for the full year of 2021. The chipmaker elevated that guidance yesterday to $4.60 EPS on a $72.5 billion business revenue.

Intel stock is up over 25% year-to-date (YTD).

Summary

The US-based chip company Intel reported flat sales and a drop in profit for Q1 that sent Intel stock to trade lower. Still, the reported Q1 figures came in better than what analysts were expecting.

About the Author


Headshot of Mariliana Fotopoulou

Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.

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