Markets

Why Intel Stock Plunged Today

What happened

Shares of Intel (NASDAQ: INTC) plummeted on Friday, following the release of its second-quarter earnings report and conference call. As of 3:20 p.m. EDT, Intel's stock was down more than 16%.

So what

Intel's Q2 revenue climbed 20% year over year to $19.7 billion, driven by strong growth in its data-focused businesses. Its adjusted earnings per share, meanwhile, increased by 16% to $1.23. Both figures were above Wall Street's estimates. Analysts expected revenue and adjusted EPS of $18.5 billion and $1.11, respectively. 

A downwardly sloping stock chart.

Intel stock plunged on Friday. Image source: Getty Images.

However, Intel gave investors multiple causes for concern. At 53.3%, Intel's gross margin was down sharply from the 59.8% it reached in the prior-year period and the lowest it's been in more than a decade. Falling gross margins typically reflect higher costs and an inability to pass those costs on to customers.

Worse still, Intel said the launch of its new 7-nanometer chips would be delayed by roughly six months. Analysts say the delay will give rival Advanced Micro Devices (NASDAQ: AMD), which has already begun selling its 7-nanometer chips, a significant advantage. AMD's stock, in turn, rose sharply on the news. 

Now what

There were already concerns that AMD's new chips -- due to their significantly improved performance and advanced graphics capabilities -- would begin to take share from Intel. A 6-month delay will only add to Intel's troubles and likely accelerate AMD's market share gains. Should this scenario play out, more pain could lie ahead for Intel's shareholders.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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