Intel (NASDAQ:INTC) is best-known as a hardware company. However, news today around its push into software sent INTC stock nearly 3% higher to close out Friday trading.
According to CTO Greg Lavender, Intel could see as much as $1 billion in cumulative revenue from its software business by 2027. That would be a stark improvement, given that the company made roughly $100 million in revenue in this segment in 2021.
Intel’s push into AI services, performance, and security will help it diversify its revenue in this way.
INTC Stock Higher on Improving Revenue Mix
For hardware-focused companies like Intel, software revenues are key to creating sustainable profit growth. In this macroeconomic environment, characterized by high interest rates, investors are increasingly focused on higher-margin sales. As margins rise, a given company can see a big valuation boost over time. That’s what appears to be the case today for Intel.
A new focus on software, including potential plans for software designed for AI chips, will help Intel do just that.
Investors betting on surging AI sales have clearly shifted their focus to Intel’s competitors — namely Nvidia (NASDAQ:NVDA). NVDA stock is up nearly 170% in the year to date, while INTC shares down nearly 30%. However, if Intel deliver on its CTO’s vision, some investors may be convinced to come back to INTC stock.
As Intel continues to grow its software business, Lavender’s $1 billion target gives investors a good projection for where things will be in three years. Accordingly, with more certainty, investors appear to feel comfortable piling into INTC stock today. And I don’t blame them.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
