Morningstar

Intel Earnings: Raising Fair Value Estimate Thanks to a Stunning Rise in Server CPU Demand

We’re encouraged by Intel’s manufacturing progress.

The Intel logo can be seen at the headquarters of the chip company.
Andrej Sokolow/picture alliance via Getty
Securities in This Article
Intel Corp
(INTC)

Key Morningstar Metrics for Intel

  • Fair Value Estimate
    : $105.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Intel’s Earnings

Intel INTC reported impressive second-quarter revenue of $16.1 billion, up 25% year over year and ahead of the high end of guidance of $14.8 billion. Intel expects third-quarter revenue of $16.3 billion, which would be up 19% year over year and ahead of FactSet consensus estimates of $15.1 billion.

Why it matters: Intel reported a blowout quarter, thanks to tremendous demand for server CPUs to support agentic artificial intelligence. The report was in lockstep with rival AMD’s comments that the server CPU market should grow at a 50% CAGR and be nearly four times higher than its forecast provided in November.

  • Intel’s data center and AI revenue grew 59% year over year, its highest quarterly growth percentage on record. In turn, Intel’s total revenue growth of 25% was its highest level in over 15 years.

The bottom line: We raise our fair value estimate for no-moat Intel to $105 per share from $90, driven by more optimistic near- and long-term assumptions for the server CPU end market. Although Intel faces a host of server CPU competitors, we think the rising tide of agentic AI will lift all boats.

  • Shares rose about 3% after hours but are still up over 170% year to date, thanks again to high server CPU demand and steady manufacturing progress. We now view Intel’s shares as fairly valued.
  • In addition to strong DCAI growth, Intel’s PC CPU held up well. The PC market should still be down due to higher memory and component prices, but a favorable product mix toward newer AI PC processors could be an offset for Intel.

Coming up: In addition to 19% revenue growth in the September quarter, Intel forecasts an adjusted gross margin of 42%, up modestly sequentially and about 200 basis points year over year.

  • We’re encouraged by Intel’s manufacturing progress. Yields are improving on Intel’s latest 18A process; its sister technology (Intel 18A-P for external foundry customers) should arrive later this year, and Intel 14A is on pace to reach high-volume production in 2028.

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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