Factors Determining the Tone of Intel’s (INTC) Q4 Revenue

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Intel INTC is expected to release its fourth quarter 2020 results on January 21, 2021.

At the Q3 earnings conference, management forecast a decline in PC-centric business year-over-year, while data-centric business is expected to decline about 25% year over year to the next in the fourth quarter.

Intel also expects consumer notebook momentum to continue in the fourth quarter, supported by remote working and online trends. In addition, an increased supply could contribute to the results.

According to preliminary results released on January 13, the company expects fourth quarter revenue and earnings per share to exceed its previous guidance provided on October 22, 2020.

On January 13, Intel announced that it had appointed Pat Gelsinger as the company’s new CEO. Current CEO Bob Swan will step down on February 15, 2021. Additionally, the chipmaker intends to take stock of its solid advancements in its 7-nanometer (nm) process technology at its conference on fourth quarter results.

Key estimates for the fourth quarter

For the fourth quarter, Intel previously expected non-GAAP revenue of $ 17.4 billion. Zacks’ consensus estimate for revenue is set at $ 17.44 billion, which indicates a decrease of 13.7% from the quarter last year.

Intel Corporation Price and EPS Surprise

Intel Corporation price-eps-surprise | Quote from Intel Corporation

For the fourth quarter, Intel had projected non-GAAP earnings of $ 1.10 per share. Zacks’ consensus estimate for earnings is set at $ 1.10, stable over the past 30 days. The figure suggests a decrease of 27.6% from the figure of the previous year.

Notably, the company has beaten the profit estimate in each of the past four quarters, with the average surprise being 11.9%.

Factors to note

Weak demand for data centers in corporate and government end markets due to the coronavirus crisis, weakness in data-centric businesses, is expected to have affected Intel’s performance in the fourth quarter.

However, the growing adoption of cloud-based solutions in mobile computing and network infrastructure for 5G, triggered by the dynamics of the work-from-home wave induced by the coronavirus crisis, could have cushioned the expected decline. .

Additionally, coronavirus-induced work from home and online learning may have boosted sales of processors used in laptops and corporate data center servers. This is expected to be reflected in fourth quarter revenue.

Notably, the encouraging trend in fourth-quarter PC shipments, driven by increased demand and an improved supply chain, likely contributed to revenue for Intel’s Client Computing Group (CCG) segment. According to IDC data, Q4 2020 PC shipments improved 26.1% year-over-year to 91.6 million units.

Additionally, the robust adoption of Xeon processors, which are built into the Optane DC persistent memory solution, may have contributed to the top line of the quarter to report. The strong dynamics of the 10nm mobile processor bodes well.

Additionally, the gradual adoption of the latest Core vPro and Lakefield processors and Tiger Lake series offerings is expected to be reflected in revenue for the quarter to be released.

In addition, rising Wi-Fi and modem sales and strong demand for laptops remain positive winds. Notably, Intel’s Optane DC persistent memory modules are operated by companies like Oracle ORCL, SAP, Google, Microsoft MSFT, Baidu and Alibaba.

In addition, the chipmaker’s non-volatile memory business likely benefited from improving NAND price trends and the growth of Optane bits. In addition, the growing demand for SSDs for servers in data centers, which drove the growth of the NAND market, could have benefited the fourth quarter performance.

Nonetheless, Mobileye’s new design wins, and the growing proliferation of IoT and the stabilization of the auto industry may have contributed to Intel’s performance in the fourth quarter. The growing influence of Mobileye’s SuperVision Advanced Panoramic View Driver Assistance System (ADAS) in premium electric vehicles (EVs) bodes well.

However, sluggishness in Intel of Things Group (IOTG) end markets, particularly retail and industrials, is expected to have affected revenues for the quarter under review.

In addition, the growing influence of Advanced micro-systems“AMD’s second generation of its EPYC server processors is likely to have created price pressure and limited margin expansion.

In addition, increased expenses related to the accelerated ramp-up of 10nm products and improved 7nm production are expected to have weighed on fourth quarter profitability.

Intel currently carries a Zacks # 4 (sell) rank.

You can see The full list of current Zacks # 1 Rank (Strong Buy) stocks here.

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