After the market closes, Intel (INTC) will set the tone for chip stocks, as the company reports quarterly results. Its competitor, Advanced Micro Devices (AMD), reports on Thursday, October 20. Investors will look closely at two things from the semiconductor heavyweight’s results: profit margin and PC chip sales.
Intel managed to keep gross margins north at respectable levels in the past few years, despite the chronic but steady decline in PC sales. Since ending Windows XP support a few years ago, Microsoft’s (MSFT) push for Windows 7, followed by Windows 10, is giving the PC market a chance for growth. IDC is optimistic the drop in PC sales will lighten. On October 12, IDC said that third quarter that PC shipments dropped just 3.9 percent to 68 million units, or 3.2 percent ahead of projections.
IDC’s report bodes well for Intel’s quarterly results. Intel has no meaningful competition for its mainstream and high-end processors. It should sustain gross profits above 61% - 63%. A ramp up in sales of VR-ready machines along with a Windows 10 refresh for consumers may mean Intel raises its forecast.
Intel accomplished two notable changes in the last quarter. First, it sold a majority stake in McAfee on September 7. Second, it launched Stratix 10, an FPGA combined with an ARM CPU on 14 nm manufacturing. Looking ahead, expect more low-powered re-architected solutions from the Altera division.
