Intel (INTC) Reshapes Financial Structure for Foundry Business

Intel Corporation INTC recently revealed its initiatives to revamp its financial reporting structure, reflecting the company’s transition to a foundry operating model. This strategic move is geared toward driving cost discipline, enhancing profitability and creating value for shareholders in the rapidly evolving semiconductor market.

Effective from the first quarter of 2024, the new reporting framework is designed to provide more clarity and transparency regarding the company’s operating segments and financial performance. The Intel Products segment will include Client Computing Group, Data Center and AI, and Network and Edge. Altera, Mobileye and Other will be combined under the label All Other. Additionally, Intel Foundry constitutes another distinct segment.

In the Intel Products segment, the company is aiming for a 60% non-GAAP gross margin and a 40% non-GAAP operating margin by the end of 2030, backed by a better pricing strategy and cost competitiveness.

The new operating segment called Intel Foundry will focus on foundry technology development, manufacturing and supply chain, as well as foundry services (previously known as IFS). This segment will account for revenues generated from both external foundry customers and Intel’s own products.

In the adjusted financial statements post-reorganization, Intel disclosed a $7 billion operating loss in 2023 from the Intel Foundry unit. The loss widened from $5.2 billion in 2022. The operating losses are anticipated to peak in 2024 and are projected to reach breakeven at some point between now and 2030.

The transition to the new operating model is expected to enable Intel Foundry to achieve profitable growth and unlock unrealized value across Intel’s approximately $100 billion in capital assets. Management has set an ambitious target of becoming the world’s second-largest foundry by 2030 while also reaching 40% non-GAAP gross margin and 30% non-GAAP operating margin in this segment.

Intel’s unique position as a top-tier semiconductor manufacturer and a leader in fabless technology presents substantial prospects to ensure steady advancements across these complementary businesses.

In consumer-PC market, AMD has become a key challenger to Intel, courtesy of the AMD Ryzen desktop processor family. The company’s desktop-based processor offerings include Ryzen and high-end Ryzen Threadripper processors, among others.

The stock has gained 23.8% over the past year compared with the industry’s growth of 152.2%. AMD, a major competitor of Intel, has gained 88.4% over the past year compared with the industry’s growth of 81.5%.

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Intel currently carries a Zacks Rank #3 (Hold).

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Nokia Corporation NOK carries a Zacks Rank #2 (Buy) at present. It has a long-term earnings growth expectation of 9.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company is well-positioned for the ongoing technology cycle, given the strength of its end-to-end portfolio. Its installed base of high-capacity AirScale products, which enables customers to upgrade to 5G quickly, is growing fast.

Pinterest PINS, carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 37.42%. In the last reported quarter, it delivered an earnings surprise of 3.92%.

Pinterest is increasingly establishing a unique value proposition to advertisers that could provide a competitive advantage in the long haul. Through various innovations, it continues to dramatically improve the advertising platform, which appears to be one of the best ad platforms for consumer discretionary brands looking for ways to reach customers and stretch smaller ad budgets.

NVIDIA Corporation NVDA, currently sporting a Zacks Rank #1, delivered a trailing four-quarter average earnings surprise of 20.18%. In the last reported quarter, it delivered an earnings surprise of 13.41%.

NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.

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