Intel's upcoming earnings have this analyst wondering if the numbers actually matter

Bernstein analysts report that Intel's upcoming second-quarter earnings will be overshadowed by investor focus on the company's long-term strategy, including its lagging position in the AI race, decisions regarding its 18A chip manufacturing process and potential write-offs, and broader structural headwinds. While they slightly adjusted Q2 revenue estimates to $11.9 billion, still below the $12 billion consensus, the analysts emphasize that strategic questions, particularly those facing new CEO Lip-Bu Tan, are paramount. They maintain an "avoid" rating and a $21 price target, noting Intel's stock has significantly underperformed the broader market and semiconductor index since its last earnings report.

Analysis

Ahead of Intel's second-quarter earnings, the focus for investors has shifted decisively from near-term financial results to profound questions about the company's long-term strategy under its new CEO, Lip-Bu Tan. Bernstein analysts suggest the quarterly numbers are largely irrelevant, as the market is more concerned with worsening structural headwinds and Intel's lagging position in the artificial intelligence race. A central point of concern is the future of its foundry business and the 18A chip manufacturing process, with a Reuters report suggesting Intel may not offer it to external clients, potentially triggering billions of dollars in write-offs. While the PC segment may see a temporary uplift from tariff-related demand pull-forward, this is viewed as a low-quality driver. Bernstein's own estimates underscore this pessimism, with their Q2 revenue forecast of $11.9 billion and Q3 forecast of $12.5 billion both sitting below the FactSet consensus. The stock's significant underperformance, gaining only 9% since its last report versus nearly 15% for the S&P 500 and 38% for the PHLX Semiconductor Index, quantifies the prevailing investor skepticism.

Key Decisions for Investors

• Investors should prioritize management's commentary on strategic direction over the reported Q2 financial figures, with a specific focus on the go-forward plan for the foundry business and the 18A process.
• Given the stock's substantial underperformance relative to the PHLX Semiconductor Index, which has surged 38%, it is critical to evaluate the opportunity cost of holding Intel while it remains on the sidelines of the AI-driven market rally.
• A cautious or avoidant stance is warranted, as suggested by Bernstein's analysis, until there is a clear and credible turnaround strategy that addresses the company's structural headwinds and competitive positioning in AI.
• Monitor for specific updates regarding customer interest in the foundry business and the impact of ongoing layoffs, as these will be key indicators of the new leadership's ability to execute a strategic shift.