Intel (INTC) shares edged lower Friday after the biggest U.S. chipmaker told investors to expect muted profit margins as it accelerates spending on new foundries and technologies to meet future demand, while extending the timeline on its new strategy roadmap.
Intel, which unveiled a $5.4 billion takeover bid for Tower Semiconductor (TSEM) earlier this week, told an investor conference that gross margins would fall by 6 percentage points this year, to 52%, before slowly improving by 2026 -- a year behind its prior forecast -- when revenues from its new investments will start to accelerate.
Intel is also planning to invest $20 billion into two chipmaking plants in Ohio - following on from similar investments in Arizona last March -- that it hopes have have up-and-running within three years as it expands domestic production.
“The continued proliferation of technology is driving sustained, long-term demand for semiconductors, creating a $1 trillion market opportunity by 2030,” said CEO Pat Gelsinger. “With that opportunity in mind, today we outlined our strategy and roadmap for accelerating to 10%-12% year-over-year revenue growth by 2026 by doubling down on innovation, driving even deeper collaboration with our customers and partners, and leveraging our core strengths to successfully grow traditional markets and disrupt new ones."
"Our goals are ambitious, but I’m confident we have the right strategy and right team to achieve them and to deliver long-term value for our shareholders," he added.
Intel shares were marked 3.8% lower in early Friday trading to change hands at $45.80 each.
Late last month, Intel said March quarter earnings would come in around 80 cents per share, around 6 cents shy of the Refinitiv forecast, after posting record revenues of $19.53 billion and an adjusted bottom line of $1.09 per share over the three months ending in December, both of which handily topped Street consensus forecasts.
"We thought Intel made its case that the company is undergoing a major transformation, and that Gelsinger is making big and bold bets to win back Intel's crown," said BMO Capital Markets analyst Ambrish Srivastava, who lowered his price target by $2, to $50 per share while holding his 'market perform' rating in place following last night's investor event.
