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Intel Earnings: Several Near-Term Concerns Persist as Company Turnaround Continues

There is a tough road ahead until Intel can prove it has a meaningful pipeline of customers

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Intel Corp
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What We Thought of Intel’s Earnings

Intel INTC reported first-quarter revenue of $12.7 billion, flattish year over year but toward the high end of guidance, while gross margin exceeded guidance. Second-quarter revenue is expected to be $11.8 billion at the midpoint of guidance, below the FactSet consensus estimate of $12.8 billion.

Why it matters: Intel’s first-quarter results look good on the surface, but we’re concerned that the PC processor revenue mix shifted toward older chipsets as PC manufacturers want to hit lower price points. Data center revenue may have also been artificially boosted by pull-ins ahead of tariffs.

  • Much of Intel’s turnaround hinges on foundry development of 18A to bring leading-edge processors to market, and while Intel’s road map is on track, we’re concerned that customers may not see enough value in these high-end chips to drive robust demand and fill Intel’s 18A factories.
  • Meanwhile, Intel remains desperate to acquire a premier foundry customer for 18A and future nodes. We like the comments laid out by new CEO Lip-Bu Tan, but think Intel still has a tough road ahead until it can prove it will have a meaningful pipeline of external foundry customers.

The bottom line: We maintain our $21 per share fair value estimate for no-moat Intel, along with our Very High Morningstar Uncertainty Rating. Shares sold off about 5% after hours, and we view shares as fairly valued.

  • We still see a wide range of outcomes for investors, with the most bullish involving some sort of support for the foundry business, either from the US government or external foundries and customers in tandem.

Coming up: Intel’s second-quarter forecast was conservative when compared with normal seasonal patterns, but was likely prudent given tariff concerns. Within semis, we are modestly more concerned that Intel’s near-term strength was boosted by tariff pull-ins, meaning that a shortfall may loom ahead.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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