Intel Earnings: What to Watch

By Ted Greenwald Features Dow Jones Newswires

Intel Corp. is expected, after the market closes Thursday, to announce first-quarter earnings for the fiscal year that ended in March. Here's what to look for.

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EARNINGS FORECAST: Analysts expect Intel to report diluted earnings per share of 65 cents on an adjusted basis for the quarter, according to a survey by Thomson Reuters, up 20% year on year. Intel's own adjusted per-share earnings figures exclude restructuring charges and certain items arising from acquisitions, as well as related taxes.

REVENUE FORECAST: Analysts expect total revenue of $14.8 billion for the quarter, up 8.1% from the same quarter a year earlier.

WHAT TO WATCH:

-- DATA CENTER REVENUE: The Intel division that supplies industrial-strength processors to internet giants and corporate operations accounts for nearly 30% of the company's revenue and brings relatively high margins. While sales to big online companies are "growing nicely," enterprise sales have been soft, said analyst Vijay Rakesh of Mizuho Securities USA LLC. Intel earlier this year scaled back its estimate for annual revenue growth in the division from low double digits to high single digits. Investors will be looking to see that performance aligns with the new guidance.

-- PERSONAL COMPUTER REVENUE: Chips for laptops and desktops, where Intel holds overwhelming market share, make up more than half the company's revenue. The chip maker faces two challenges in this area: A persistently declining market and emerging competition from a revived Advanced Micro Devices Inc. Intel has guided for an annual decline of mid-single digits in segment that reports PC chip sales, but some analysts expect flat growth, since PC shipments moderated in the first quarter according to top industry researchers and AMD is gathering steam. Still, the situation warrants scrutiny going forward. "AMD is competing more effectively, and that could have a significant impact this year and next," said analyst Tom Sepenzis of Northland Securities Inc.

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-- MEMORY INVESTMENT: Intel has said it would boost capital spending to $12 billion this year from $9.6 billion in 2016, dedicating part of the increase to building its memory business. That Is an investment "investors are struggling to understand," said Srini Pajjuri, an analyst with Macquarie Capital (USA) Inc. Sales at memory specialist Micron Technologies Inc., Intel's partner in the data-storage technology known as NAND Flash, brought a 20% gross margin in 2016 compared with Intel's 61%, he said. But Intel's gamble on memory may have paid off in the quarter: Short NAND supplies drove spot prices up 42% over the last 12 months, according to research by TrendForce Corp.'s DRAMeXchange, potentially yielding a bonus in Thursday's results.

Write to Ted Greenwald at Ted.Greenwald@wsj.com

(END) Dow Jones Newswires

April 27, 2017 08:14 ET (12:14 GMT)