By Arsheeya Bajwa
(Reuters) – Intel’s third-quarter results on Thursday will show whether a recent clutch of large-scale investments can shore up its strained finances as new CEO Lip-Bu Tan tries to revive the ailing chipmaker.
Multibillion-dollar investments from Nvidia and Japan’s SoftBank, as well as an unprecedented US government stake in the September quarter, provided bright spots for Intel’s long-term turnaround.
The investment has seen its shares nearly double this year and outpace AI darling Nvidia’s earnings, setting the bar high for the company, which is expected to drop 1% in third-quarter sales to $13.14 billion, according to LSEG data. On Wednesday, the company’s shares fell 4.5%.
Investors will be looking closely for progress on the company’s broader strategy, said Joe Tigay, portfolio manager at the Rational Equity Armor Fund, which owns Intel shares.
“When you add up all (the latest investments) — what does the big picture look like for Intel? What does their money look like?” Tigay said.
INCREASE IN NET ASSETS, DIVISION OF INCOME
Last month, Nvidia said it would invest $5 billion in Intel, giving it about 4 percent after issuing new shares. In August, Intel secured another $2 billion from SoftBank.
After US President Donald Trump called on CEO Lip Bu Tan to resign over his ties to China, a hastily arranged meeting in Washington reached an unusual deal in which the US government will pay $8.9 billion.
The moves give Intel an important cash lifeline after CEO Pat Gelsinger was ousted as manufacturing expansion strained margins after years of missteps.
But scant information about the deals has left Wall Street waiting for clarity on their potential benefits.
The company is expected to post a loss of 22 cents per share and adjusted earnings per share of 1 cent in the third quarter.
Intel’s earnings per share in the September quarter could be affected by a drop in shares due to the government deal, and depending on the completion of the Nvidia and Softbank deals, earnings per share could suffer in the fourth quarter, said Ryuta Makino, an analyst at Intel investor Gabelli Funds.
“It will cause dilution, but in my opinion, the stock split is the least of Intel shareholders’ worries.”
THE PROBLEMS ARE FIXED, BUT THE END MARKETS ARE EXPANDING
While they are seen as a vote of confidence in Intel’s future, analysts and investors agree that the recent financing deals do not alleviate Intel’s long-term problems.
Intel has been steadily losing share of the PC and server central processing unit (CPU) market to AMD, and its Arm-based architecture is threatening its legacy x86 chip design.