Investing.com -- Fitch Ratings has revised the Rating Outlook for Intel Corporation (NASDAQ: INTC ) from Stable to Negative, while affirming the Long-Term Issuer Default (IDR) and Senior Unsecured Ratings at 'BBB+' and Short-Term IDR and commercial paper (CP) rating at 'F2'. The revision reflects worries about Intel's de-leveraging pace in the face of a more competitive landscape that may impact its near-term operating performance.

The ratings agency has expressed concerns that weaker-than-expected operating performance might delay Intel's return of EBITDA leverage below Fitch's 2.5x negative rating sensitivity beyond 2026. This is despite the company's current efforts to de-leverage. Over the next one to two years, contributions from minority partners, attributed to Intel's debt quantum, could offset these de-leveraging efforts.

Intel's weaker-than-expected performance is partly due to less benefit from the PC refresh cycle and AI PC demand compared to its peers. This has led Fitch to moderate its revenue and profitability growth forecasts through 2026. In 2024, Fitch-estimated EBITDA leverage was 5.0x (3.3x on a net debt basis), well above the prior forecast, and is expected to exit 2026 near 3.0x (1.5x on net debt).

Fitch predicts mid-single digit positive revenue growth for Intel in 2025 due to share losses and end-stage inventory digestion. The company's restructuring aims to save $10 billion in annual costs, some of which will drive sequential profit margin expansion. However, this expansion starts from historically low levels and is constrained by outsourcing to foundry Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).

Intel's investment intensity is expected to remain high through the forecast period, with gross capital expenditure roughly 30% of revenue. This is due to the company's commitment to regaining process technology leadership and expanding the foundry business. Despite this, Intel's credit profile benefits from the company's strong market positions in PCs and data centers (DCs), even with ongoing share erosion to its traditional competitor, Advanced Micro Devices Inc. (NASDAQ: AMD ), and ARM-based custom servers.

Intel faces intensified competition from AMD in both PCs and servers for DCs, as well as increasing utilization of custom ARM-based servers by cloud service provider customers. However, Intel's market share remains strong despite these challenges. Furthermore, the company's 18A products set the stage to stabilize share.

Fitch could stabilize the ratings at 'BBB+'/'F2' if EBITDA leverage falls below 2.5x over the near-term. Conversely, sustained negative organic revenue growth, expectations that Intel will not be able to expand gross profit margins due to technology challenges, expectations for EBITDA leverage sustained above 2.5x beyond the intermediate term, or FCF margins sustained in the low-single digits could lead to a negative rating action or downgrade.

As of Dec. 28, 2024, Intel's liquidity was supported by $8.2 billion of cash and cash equivalents, $13.8 billion of short-term investments and a $7.0 billion revolving credit facility due February 2029 and a $5.0 billion 365-day revolving credit facility due January 2026.

Intel Corp . is a leading designer and through its foundry services business, manufacturer of integrated circuits and related products for computing edge and datacenter (DC) markets.

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