Intel Warns 18A Ramp-Up, Rising Memory Costs and PC Slowdown Will Squeeze Margins
AVGO•Intel warns that its 18A process ramp-up will pressure gross margins due to low yields and higher costs while noting rising memory input costs plus a potential PC demand slowdown. The Client Computing Group’s $7.7 billion quarterly revenue faces headwinds as the company’s price-to-sales multiple stands at 12.1.
1. High-Cost 18A Process Ramp-Up
Intel’s transition to its next-generation 18A manufacturing node is expected to weigh on gross margins as early production yields remain low and unit costs stay elevated during initial runs.
2. Rising Input Costs and PC Slowdown
Management cites escalating memory and component input costs alongside prudent planning for weakening PC demand, which could dampen revenue growth in its $7.7 billion Client Computing Group.
3. Valuation Reflects High Profit Expectations
With a price-to-sales multiple at 12.1 versus a 10-year high of 4.2, current market pricing assumes robust, profitable growth; any margin pressure could challenge these lofty expectations.
