Intel Q3 Earnings Preview: 4 Things To Watch From Layoffs To Mobileye IPO

Santa Clara, Calif. chip powerhouse Intel is expected to post disappointing quarterly earnings on Thursday. But CEO Pat Gelsinger will continue to promote his ambitious comeback plan after the company successfully lobbied for the $53 billion CHIPS Act.

It’s been a tumultuous period for big tech companies – riding the highs fueled by pandemic remote work needs and this year’s lows from decreased PC demand, inflationary pressure, supply chain issues and geopolitical strife.

Intel certainly wasn’t immune to those hardships but the company forges ahead with aggressive moves to rebuild the country’s status as the world’s premier chip manufacturer. On Thursday, Oct. 27, the tech giant is expected to post its second straight disappointing earnings release, according to industry analysts.

Zacks Equity Research pegs expected quarterly revenue at $15.49 billion – down 19.3 percent from the same quarter last year. If Intel can produce a surprise and beat low expectations, the firm can perhaps avoid a further stock plummet. The company has lost 50.99 percent of its stock price year-to-date, making it the Dow Jones Industrial Average’s biggest loser year to date.

In July, the company deflated its full-year guidance with its second quarterly results – ending the quarter with a $454 million net loss. “The sudden and rapid decline in economic activity was the largest driver of the shortfall but Q2 also reflected our own execution issues in areas like product design, and the ramp of AXG (Accelerated Computing Systems and Graphics Group) offerings,” Intel CEO Pat Gelsinger said on a conference call with analysts.

At the time, David Zinsner, Intel’s finance chief, told CNBC in an interview: “We do think we’re on the bottom.” He said the company was expecting a fourth quarter rebound would help bring gross margin back to around 51 percent to 53 percent.

CRN takes a look at four key things to look out for in Thursday’s earnings call:

Layoffs

Staff reductions are all but confirmed to strike hard at Intel this year. Reports say the company could slash up to 20 percent of its workforce to compensate for declining revenue and continued economic strife. The Oregonian quoted an Intel staffer who saw a video from Gelsinger warning, “our costs are too high and our margins are too low. We have to take actions to address them.”

Intel, which as of July had 113,700 employees, late July reported that second fiscal quarter 2022 revenue of $15.3 billion, which was down 22 percent year over year led by a 25 percent decrease in revenue related to its client computing business. Intel in 2021 had 121,000 employees, the company said.

The company is expected to begin announcing cuts on or after the earnings call Thursday.

Mobileye IPO

Analysts had just this spring expected Intel’s self-driving tech unit Mobileye’s initial public offering (IPO) to reach a valuation of $50 billion. That would have been a huge boost for Intel, which bought the company in 2017 for $15.3 billion. While still one of the year’s biggest IPOs, the Mobileye deal brought an initial market capitalization of $16.7 billion.

While the IPO didn’t turn out the be the juggernaut analysts expected, Intel plans to hold on to its investment – selling just 5 percent of the company’s stock in the public offering. Mobileye raised $861 million through the IPO, with another $100 million raised through investment firm General Atlantic.

During the Wall Street Journal Tech Live conference held earlier this week, Gelsinger said the IPO was not a mere money grab. “It is a move to potential move them into the market,” Gelsinger said. “It’s not a capital raise.”

13th Gen Rollout

Not all of Intel’s news is of the gloomy variety. The company has seen strong initial demand from its 13th Gen processors aimed at the gaming market (formerly known as Raptor Lake). The company says the processor will become the new standard for desktop performance, led by Intel’s flagship i9-13900K. Early reviews are showing record-breaking clock rates for the new chips.

In an interview with CRN, Intel’s global channel chief John Kalvin said the company is ramping up efforts to facilitate channel marketing for the new products. “We have an extraordinary relationship with our channel partners,” Kalvin said. “We expect many, many partners to have these products available right at launch.”

Continued Focus On Fab Buildouts

Just last month, President Joe Biden traveled to Ohio to join Gelsinger to break ground at the company’s planned $20 billion semiconductor manufacturing campus. The building and opening of the campus will create 7,000 union construction jobs, and 3,000 full time jobs with an average salary of $135,000 a year, Biden said.

“I can’t imagine a bigger and more meaningful investment to help our partners grow than to make these big investments in long-term capacity and to build out this globally resilient supply chain,” John Kalvin, vice president and general manager of global partners and support at Intel, told CRN.