Investing.com — At the Citi TMT conference on Tuesday, Intel (NASDAQ:) provided updates on its cost-cutting initiatives, its manufacturing strategy and the state of the PC market. Notably, the company also mentioned that it expects to generate significant foundry revenues by 2025.
“While Intel’s CPU production is on track in our view, we continue to believe the company should exit the foundry business in the best interests of shareholders,” Citi analysts said in a Wednesday note.
The chipmaker said it expects significant revenue from its advanced packaging business in 2025, with the foundry business expected to achieve gross margins of 40% and operating margins of 30% by 2030.
In response to these comments, Citi analysts noted that Intel’s foundry business is likely to experience margin dilution in 2025 as a result. Intel also expects to generate substantial revenue from foundry wafers by 2027.
Additionally, the company has outlined cost-saving measures, expecting $10 billion in capital expenditure savings and $4 billion in operating cost reductions by 2025. The company also expects to reduce its sales costs by $1 billion next year and plans to save $500 million by skipping Intel 20A. .
In the PC market, Intel acknowledged that the chipmaker, while currently sluggish, believes it will return to normal seasonality in the fourth quarter of 2024.
“This is consistent with commentary from other companies such as Dell (NYSE:) and West Digital (NASDAQ:),” analysts noted.
They also continue to expect Intel to achieve manufacturing parity with Taiwan Semiconductor Manufacturing (NYSE:) for client CPUs in the first half of 2025, although Intel management noted that parity in the data center market could take longer.
Analysts maintained a neutral rating on Intel stock and a $25 price target, which reflects 23.5x estimated 2025 earnings per share (EPS).
“We expect Intel’s earnings per share to be under pressure given its foundry business, which we believe has a minimal chance of success.”
