Intel Earnings: Solid Near-Term Revenue but a Somber “State of the Union” Address

Key Morningstar Metrics for Intel

• Fair Value Estimate: $21
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Intel’s Earnings

Intel INTC reported second-quarter revenue of $12.9 billion, flat year over year, up 1.5% sequentially and above the high end of guidance. Third-quarter revenue guidance of $13.1 billion was ahead of FactSet consensus estimates and would be up 2% sequentially and down 1% year over year.

Why it matters: Intel’s revenue was better than expected, although the firm couldn’t rule out tariff-related pull-ins as a contributing factor. Meanwhile, new CEO Lip-Bu Tan provided investors with (in our opinion) a realistic, but sobering, overview of the business and Intel’s challenges ahead.

The bottom line: We maintain our $21 fair value estimate for no-moat Intel. Shares sold off about 5% after hours and appear fairly valued to us. We continue to foresee a wide range of outcomes for Intel’s future, underpinning our Very High Uncertainty Rating.

• Intel’s manufacturing remains top of mind for us. We’re encouraged that Intel’s latest process, 18A, remains on track to be introduced by the end of 2025. However, next gen 14A, which is built since inception with external foundry customers in mind, might not arrive until 2028, if not 2029.
• Tan also stated that he believed Intel’s recent foundry investments were excessive. We’re disappointed to hear that Intel was overly optimistic, but encouraged by Tan’s focus on improving free cash flow and reducing capital expenditure.

Coming up: Intel’s third-quarter revenue guidance was good, although management generally expects revenue in the second half of 2025 to be below normal seasonal patterns. Adjusted gross margin guidance of 36% represents a downtick as 18A production ramps up.

• As part of Intel’s fiscal prudence, the company will not continue its manufacturing projects in Germany or Poland, while slowing its pace of expansion in Ohio, US (while maintaining flexibility to kickstart Ohio expansion as needed).