Intel, once an iconic name in the semiconductor industry, is facing significant challenges as it prepares to report its biggest quarterly revenue drop in five quarters. The company is expected to announce an 8% decline in revenue to $13.02 billion. This downturn signals ongoing erosion in both the data center and personal computer (PC) market shares.
Under the leadership of CEO Pat Gelsinger, Intel has been attempting to reclaim its lost market lead. However, the company’s efforts have been hampered by mounting losses in its contract manufacturing business and missed opportunities in the generative AI-driven chip boom. Notably, Intel passed on an investment in ChatGPT creator OpenAI, which has further impacted its competitive position.
Investors are increasingly concerned about Intel’s future prospects. The company’s stock has plummeted by more than 50% this year, and its market value has dipped below $100 billion. Analysts and shareholders are calling for clarity on Gelsinger’s plans to get Intel’s latest manufacturing technology up and running. The company’s disastrous quarterly report in August has only added to the doubts surrounding its recovery strategy.
Intel’s foundry business is expected to post an operating loss of $2.55 billion for the quarter, weighed down by the capital-intensive process of running and expanding fabs. The company’s adjusted gross margin is projected to drop by more than 7 percentage points to 37.9%. This decline is partly due to the production ramp-up of Intel’s chips for AI-powered PCs, which have yet to drive the expected demand resurgence.
Intel’s struggles are further compounded by stiff competition from rivals like AMD and Nvidia. AMD’s PC chip revenue is expected to grow by more than 18% in the third quarter, while Intel’s PC unit sales are likely to decline by over 6%. In the data center market, Intel’s revenue is expected to drop by about 17%, marking the 10th consecutive quarter of declines. AMD and Nvidia have been gaining ground in the AI graphics processor segment, where Intel has little presence.
Despite the current challenges, Intel is not without a plan for recovery. Gelsinger has outlined a three-pronged strategy focusing on fab upgrades, CPU development, and AI accelerators. However, these efforts are not expected to bear fruit until 2025 or later. Investors remain skeptical, with many calling for Intel to spin off its manufacturing business to focus solely on chip design.
