Earnings Special: Intel Plunges on PC Sales Slump & Amazon Slips

Intel

Across the shows: 4 speakers in other episodes, 2 bullish and 2 bearish calls, past 30 days

• Kunjan Sobhani · Bloomberg IntelligenceBearish

  Intel's gross margin drop and weak PC demand will outweigh the data center beat near term.

  Intel missed its fourth-quarter guidance because PC processor demand is sputtering, and its data center business, though beating, is supply-constrained. The data center beat is not large enough to offset the PC headwind. Gross margin missed badly: it fell roughly 600 basis points quarter over quarter after reaching the mid-40s. Shipping more data center product on newer nodes carries lower margins until volumes reach a profitable point, and PC is the better-margin business, which is also weakening. The mix of data center and PC is therefore not helping margins, and the gross margin trajectory has repeatedly taken one step forward and two steps back.

  “That's very substantial. We finally had Intel getting to sort of the mid forties after a few quarters of really good work. And so we are backed out again with almost 600 plus basis point of a decline quarter over quarter.”at 3:56

• Kunjan Sobhani · Bloomberg IntelligenceBullish

  Intel's data center push is the right long-term bet, with foundry as its North Star.

  Intel is right to invest in data center capacity and focus on it because it is the better, faster-growing end market. Foundry remains the North Star for the company, and management has made a lot of progress there. Positive packaging announcements are encouraging, since Intel's packaging technology is differentiated, though he wants to see significant material revenue from that business. Near-term margin pain and investor impatience are the cost of this strategy, so investors need to be patient, though peer pressure makes that hard.

  “Investing to bring up capacity in the data center and focusing on the data center is the right choice because that is the better, faster growing end market in the future.”at 6:14

Advanced Micro Devices

Across the shows: 4 speakers in other episodes, 4 bullish and 0 bearish calls, past 30 days

• Kunjan Sobhani · Bloomberg IntelligenceNeutral

  AMD faces similar PC headwinds but should fare better than Intel, helped by share gains.

  AMD is also exposed to the same PC market weakness that hurt Intel. However, he does not expect AMD to do much worse than Intel, because of its share gains. He is watching AMD's report next week closely.

  “AMD is also exposed to the similar PC [headwinds], but we don't think they will do... much worse because of their exposure and share gains”at 7:53

Amazon.com

Across the shows: 23 speakers in other episodes, 23 bullish and 5 bearish calls, past 30 days

• Anurag Rana · Bloomberg IntelligenceBullish

  AWS growth above 40% into 2027-28 is strong; the stock sell-off is overdone.

  AWS sales grew 39%, roughly in line with estimates, and investors seem disappointed it did not beat by a bigger margin. Management expects AWS growth above 40% in 2027 and 2028, which he sees as very strong given the point in the cycle. AWS has operating margins close to 39%, a very good business. Its roughly $180 billion run rate growing 40% a year is commendable. Heavy spending and the current cash-flow drain are early in the cycle; as Amazon gains market share it will sell additional services such as application modernization, and the backlog on its balance sheet supports the investment.

  “They're expecting AWS sales to be above 40% into '27 and '28. I think that's also very, very strong numbers given where we are in the cycle.”at 9:15

AI infrastructure & data centers

• Anurag Rana · Bloomberg Intelligence

  Data center buildout faces rising political opposition and funding costs that could delay growth.

  Two things have changed in the last six months. Interest rates have risen sharply, which affects companies' ability to fund expansion plans. The political climate has also turned against data center buildouts. The key risk is delivery: if data centers are delayed, cash flow stays negative and the projected growth fails to materialize for reasons outside companies' control. Microsoft already cited a delay at a third-party data center partner, which he sees as an early warning sign. A widespread repeat of such delays could follow because the political climate is very negative toward new data centers.

  “The second is a changing political climate, which is seeing some opposition to data center buildup. ... We saw Microsoft talk yesterday about there was a delay in data centers from one of their third parties.”at 11:42