Analyst explains why Intel stock is down despite market-beating results

Intel Corp (NASDAQ: INTC) stock slipped about 4% in after-hours trading on Thursday as the company reported market-beating quarterly results, but its future guidance came in only marginally above the Wall Street expectations.

Financial performance

Intel reported $5.06 billion of net income in the fiscal second quarter that translates to $1.24 per share. This compares to last year’s $5.11 billion net income or $1.19 per share. On an adjusted basis, the chipmaker earned $1.28 per share versus the year-ago figure of $1.23 per share.

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Intel valued its revenue in Q2 at $19.63 billion – a decline from $19.73 billion in the second quarter of the previous year. It was the fourth consecutive quarter for the semiconductor company to see a year-over-year decline in revenue.

Revenue from individual business segments

Intel’s memory business generated roughly $1.23 billion of revenue in the recent quarter. Other notable figures in the earnings report on Thursday include a 9% annualised decline in data-centre revenue, a 6% increase in client-computing revenue, a 34% decline in non-volatile memory-solutions revenue, a 47% growth in IoT revenue, and a massive 124% increase in Mobileye revenue.

All of the aforementioned segments except for Mobileye beat Wall Street estimates in the second quarter.

Guidance for the third quarter

For fiscal Q3, Intel now forecasts about $19.2 billion of revenue and $1.10 of adjusted EPS. In comparison, analysts are calling for $18.11 billion of revenue and $1.09 of adjusted per-share earnings.

The earnings report comes a week after Intel said it wanted to acquire GlobalFoundries for $30 billion.

Stacy Rasgon’s comments on CNBC’s “Closing Bell”

Commenting on why the share price was down despite better-than-expected results, Stacy Rasgon of Bernstein Research, who has an underperform rating on the stock, said on CNBC’s “Closing Bell”:

“There’s still an open question about what do the transition economics look like; what does the next year look like? What’s embedded in the guidance is that the margins and the structural economics of the company are coming down. The issues that Intel didn’t show up in a quarter are the results of decisions that were made over the last five to ten years. It’s going to take years to fix everything.”