The U.S. economy grew by 2.8% in the second quarter, surpassing expectations. This growth was driven by robust consumer spending, increased government expenditure, and a significant inventory build-up.

The majority of companies have reported their Q2 earnings, revealing a generally positive economic outlook. Approximately 90% of S&P 500 companies have shared their Q2 results, showing an 11% increase in earnings and 5% revenue growth year-over-year. Notably, 80% of these companies beat EPS estimates, while 59% exceeded revenue expectations.

Despite the strong Q2 performance, estimates for the current period have begun to decline more rapidly than in previous quarters. S&P 500 earnings for Q3 2024 are now expected to grow by 4.7%, down from the 6.9% forecasted in early July.

Intel’s Disappointing Performance

Despite the overall positive market performance, Intel (NSDQ: INTC) experienced a significant stock decline after releasing its Q2 earnings. The company’s stock plummeted over 26%, marking its worst trading day in four decades.

Intel reported Q2 revenue of $12.8 billion, a 1% decrease year-over-year. The company’s gross margin fell to 38.7%, and its EPS of $0.02 missed expectations.

In response, Intel announced aggressive cost-cutting measures, including a 15% workforce reduction by the end of 2025 and the suspension of its dividend starting in Q4 2024. Additionally, Intel reduced its 2024 gross capital expenditure forecast to $25-27 billion, down from earlier projections.

Key Factors Behind Intel’s Stock Decline

Several factors contributed to Intel’s sharp sell-off. The disappointing gross margin and EPS highlighted profitability issues, and the company acknowledged a slower-than-expected recovery. Intel’s Q3 revenue guidance fell below seasonal norms, raising concerns among investors.

The aggressive cost-cutting measures, while intended to improve financial performance, suggest deeper underlying problems that could affect future growth. The dividend suspension and reduced capital expenditure have further unsettled investors, raising doubts about Intel’s competitiveness and growth prospects.

Ongoing Challenges and Competitive Pressures

Intel continues to face challenges in regaining market share in the PC chip and manufacturing sectors. The company’s Data Center, AI, and Client segments all missed revenue expectations, and competition from AMD (NSDQ: AMD), NVIDIA (NSDQ: NVDA), and Qualcomm (NSDQ: QCOM) adds to concerns about Intel’s future performance.

Despite ongoing efforts, Intel is still struggling to catch up in these critical growth areas. Management indicated that gross margins will remain under pressure due to factors like the ramp-up of new products and reliance on external manufacturing.

Long-Term Outlook and Macro Headwinds

Intel’s foundry business is not expected to break even until around 2027, underscoring the long-term nature of its turnaround efforts. Additionally, macroeconomic headwinds, including weaker consumer and enterprise spending, particularly in China, could further hinder future growth.

Investors might understandably look for value here. After all, this is Intel. But, given the challenges Intel faces, including profitability issues, competitive pressures, and long-term uncertainty, investors should approach Intel stock with caution for the foreseeable future.

Read This Story: How to Beat Wall Street…Under All Investing Conditions

Editor’s Note: In a new presentation, our colleague Jim Fink can show you how to receive regular payments of $2,950 or more. He calls it his “I.V.L. System” and it generates winners at a mind-boggling clip.

Jim Fink is the chief investment strategist of the premium trading service, Options for Income. His system works for beginners and for seasoned trading experts alike.

Even if you’re still unsure how options trading works…this system is for you. Or if you’re a pro who trades 10 contracts a day…this is for you, too. Jim’s I.V.L. system works in up or down markets, when inflation is elevated or low, and regardless of Federal Reserve monetary policy.

Jim likes to keep it simple. Every week, he’ll send you easy-to-follow instructions that’ll put you on Wall Street’s payment list. You’ll get the money right away, up-front, in your trading account.

Jim Fink made himself rich trading options. Now he gets his kicks helping other people get rich. Want to earn life-changing income? Click here.