Can Healthy Processor Revenues Aid Intel's Q2 Earnings?

Intel Corporation INTC is scheduled to report second-quarter 2024 results on Aug 1, after the closing bell. In the to-be-reported quarter, the company is likely to have recorded higher revenues year over year from the Client Computing Group, backed by a strong emphasis on product innovation. Efforts to increase efficiency in semiconductor manufacturing and improve the supply chain are positive factors.

Factors at Play

CCG is the company's largest segment and accounts for the lion's share of total revenues. It includes computer CPUs, several server boards, form factor systems and graphic products.

During the second quarter, Intel announced that it has surpassed 500 AI models optimized for the Intel core Ultra processors. The models cover a wide array of AI applications including large language models, diffusion, super resolution, object detection and computer vision. These AI applications can be deployed across various processing units within the Ultra Core processors, including CPU, GPU and NPU (Neural Processing Unit). This has significantly bolstered Intel's position in the emerging market of AI PCs.

Intel is steadily advancing towards its target of shipping more than 40 million AI PC processors in 2024. The company is scaling its AI footprint to edge devices and PCs with its Core Ultra processors, supporting more than 100 software vendors.

In the quarter under review, Intel unveiled the Lunar Lake architecture at Computex 2024. The Lunar Lake processors will bolster the capabilities of Neural Processing Units and deliver significant performance improvement in AI PCs. Featuring advanced graphics and AI processing power, the solution promises improvements across the security, battery life and power efficiency of devices. These developments are likely to have boosted revenues from this segment.

Overall Expectations

The Zacks Consensus Estimate for revenues from the CCG segment is pegged at $7.51 billion, indicating an increase from $6.78 billion in the year-ago quarter. Our estimate for revenues from this segment is pegged at $7.43 billion, suggesting 9.7% growth year over year.

For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $12.92 billion, which indicates a decrease from the year-ago quarter's reported figure of $12.95 billion. The consensus estimate for adjusted earnings per share stands at 10 cents, suggesting a decline from 13 cents reported in the prior year.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Intel for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +10.79%. The Most Accurate Estimate is pegged at 11 cents, while the Zacks Consensus Estimate stands at 10 cents.

Zacks Rank: Intel has a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Fortinet FTNT is set to release quarterly numbers on Aug 6. It has an Earnings ESP of +3.41% and a Zacks Rank #3.

The Earnings ESP for BWX Technologies BWXT is +0.88% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug 5.

The Earnings ESP for Watts Water Technologies WTS is +1.17% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug 7.

To read this article on Zacks.com click here.