Intel is scheduled to release its next earnings report after closing bell on Tuesday. The chip maker already preannounced its results for the first quarter, so there should be few surprises in tomorrow’s report.

Intel Corporation Earnings Preview: Cautious As PC Demand Weakens

What to expect in Intel’s earnings report

In a report dated April 10, Deutsche Bank analyst Ross Seymore and his team said they expect the tone of tomorrow’s report to be “cautious” and the results to be in line with the preannouncement. They’re projecting revenue of $12.8 billion, a 13% quarter over quarter decline.  That’s in line with the revised guidance of $12.8 billion, +/- $300 million, which management provided on March 12.

Weak demand for PCs and higher channel inventory burn pushed Intel’s total addressable market for desktops to a multi-year low, the analysts say. They expect revenue from the company’s PCG segment to fall 17% sequentially as a result of that weakness in desktops.

The Deutsche Bank team is also expecting seasonal weakness in DCG revenues, a 9% sequential decline, and $10 million in net revenue for Intel’s MCG segment. Revenue from IOTG and software is expected to fall 5% quarter over quarter, while other revenue is expected to be flat sequentially. Starting with tomorrow’s earnings report, Intel will combine its MCG and PCG segments into one called the Client Computing Group.

The analysts are expecting Intel’s gross margin to fall 550 basis points quarter over quarter to 59.9%. They cite higher costs related to the 14 nanometer production process, startup expenses for the 10 nanometer line and a decline in volumes as the reason for the lower gross margin.

They project earnings of 40 cents per share, which is just slightly lower than the consensus estimate of 41 cents per share.

Intel management to be cautious

The Deutsche Bank team expects management to guide for growth to be greater than seasonal because the first quarter was so weak. For the June quarter, they’re expecting revenues to fall 7% sequentially to $13.8 billion. That’s compared to the consensus estimate of $13.5 billion, a 5% increase, and the five-year average of a 2% increase.

The analysts believe Intel’s first quarter channel inventory and desktop revenues “were at unsustainably low levels” heading into the end of the first quarter. They’re projecting a gross margin of 61.2%, operating expenditures of $4.95 billion related to startup costs from the 10 nanometer process, and more share repurchases. This would result in second quarter earnings of 51 cents per share. That’s ahead of the consensus estimate of 48 cents.

The Deutsche Bank team reiterated its Buy rating and $38 per share price target on the chip maker heading into tomorrow’s earnings report. As of this writing, shares of Intel were up 0.16% to $31.98 per share in premarket trading.