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Will Competition From Nvidia and AMD Hurt Intel's Earnings?

As we head further into the busiest stretch of the Q3 earnings season, investors are starting to turn their attention to the upcoming report from Intel INTC, the largest semiconductor company in the world. This chip-making behemoth will release its third-quarter financial results on Thursday, October 26.

The semiconductor industry has been red-hot in 2017, especially as demand from emerging markets like cloud computing and the Internet of Things continues to heat up. However, Intel shares—which are up 12.5% on the year—have lagged the industry’s gains.

Intel’s earnings report will still serve as an important bellwether for the entire technology sector, but the stock has struggled to gain momentum as investors have become increasingly concerned with the chipmaker’s competition.

Recently, Intel has felt pressure from the likes of Nvidia NVDA and Advanced Micro Devices AMD. Nvidia’s artificial intelligence processors are already at the forefront of the booming AI industry, while AMD has doubled down on its server chips. And both of these companies compete with Intel in the ever-important gaming segment.

But have Nvidia and AMD done enough to put a dent in Intel’s upcoming earnings report? Well, one approach to answering this question is to focus on Intel’s core business segments.

Luckily, by using our exclusive non-financial metrics estimates file, we can gauge analyst sentiment and predict the company’s performance in its key units.  These important, stock-driving estimates are updated daily and are based on the independent research of expert stock analysts. Learn more here>>>

Because of Nvidia and AMD’s popularity in the gaming market, we might expect to see an impact in Intel’s Client Computing Group. This business segment includes the company’s products designed for notebooks and desktops, so it could certainly feel the effects of these gaming-friendly chipmakers.

According to our latest consensus estimates, the Client Computing Group is expected to post revenues of $8.62 billion, which would represent a slump of about 3% from the $8.89 billion posted in the year-ago period.

Still, while this dip could imply that Intel is losing some market share in the personal computing space, the company has made some strides in this area recently. For example, Intel recently launched its eighth-generation Core processors, which should lift the company’s gaming endeavors.

And on top of this, the Client Computing Group has been a surprise performer for Intel this year. In fact, in the second quarter, Intel posted revenues of $8.21 billion in this unit. That results smashed our consensus estimate of $7.82 billion and marked year-over-year growth of nearly 12%.

Heading into its report, Intel is sporting a Zacks Rank #1 (Strong Buy). The stock also has a positive Earnings ESP of 0.06%, so we can feel more confident about the company’s chance at an earnings beat.

Intel shares are sitting near their 52-week, but if the company can outperform again—especially in key categories like Client Computing—the stock might just break into a new range (also read: 3 Key Estimates for Intel's Q3 Earnings Report).

Make sure to check back here for our full analysis once Intel releases its report later this week!

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