Wall Street analysts see some issues with Intel’s earnings

Intel shares lost most of their post-earning gains Friday as Wall Street analysts gave the company’s better-than-expected Q3 headline numbers a flinty-eyed examination. Here’s some of what they found.

The company’s long-standing business of selling the chips used in PCs and laptops — Intel’s Client Computing Group, or CCG, business unit — did better than expected.

Bernstein Research: “CCG revenues were particularly robust, >$400M above consensus driven by Windows 11 upgrade cycle and PC refresh and growing AI PC adoption.”

Mizuho: “We believe INTC continues to see tailwinds from the Win11 refresh and AI PC sales. INTC noted AI PC mix continues to ramp as it expects to exit 2025E with 100M AI cumulative AI PCs sold.”

Likewise, Intel’s Data Center and AI unit, where it sells chips for servers, also seemed to do pretty well, posting quarter-on-quarter growth of 5% to $4.1 billion.

There were some catches, however, with much of the growth driven by stronger-than-expected demand for the older Intel chips — often referred to by the shorthand Intel 7 or Intel 10, which refers to the size, in nanometers, of the process used to etch transistors onto silicon wafers.

Barclays: “Interestingly, the company pointed to supply constraints (likely to persist into 2026) and not being able to fully serve strong demand driven by AI workloads. A lot of the interest is still on older generation products at Intel 7 and Intel 10, where management is not intending to increase capacity and is attempting to transition customers to the new products (although is finding some difficulty).”

Bernstein Research: “Commentary around ‘demand exceeding supply’ on the surface sounds encouraging... However, supply constraints appear primarily on 10/7nm (where demand is higher because customers are less enthused by Intel’s newer products) and seems likely to cost further share.”

Meanwhile, the company’s struggling foundry business — where it manufactures chips made by other companies and competes against global leader TSMC — continues to flounder, as it attempts to convince large customers to adopt its next-generation “18A” chip production technology aimed at data centers that need high-performance chips.

Citi: “Revenue from Intel Foundry (31% of 3Q25 sales) was $4.24 billion, down 4% QoQ, below our estimate of $4.55 billion driven by lower packaging sales... We believe investors think Intel’s merchant foundry business can be profitable, but we don’t given our belief that Intel’s foundry is years behind TSMC. We continue to believe Intel should exit the foundry business.”

Bank of America: “We don’t expect a material improvement in the current unfavorable cost structure for Intel Foundry, given slow internal adoption of 18A node (peak capacity in 2030+) and foundry competition in the US.”

Needham: “INTC appears to be increasingly challenged in the overall data center market, as it seems wallet share is shifting away from general-compute to AI-compute.”

On the brighter side, several analysts highlighted a far more optimistic tone by management.

It seems that the addition of the US government as a shareholder — which would seem to imply ongoing support for the company from the unusually activist Trump administration — as well as announcements of partnership deals with erstwhile competitor Nvidia and multibillion-dollar investments from politically connected investors like Japan’s SoftBank have done wonders for the outlook of Intel executives.

The additional cash, supplemented by the divesture of its Altera unit and sale of some of its stake in Mobileye, alongside the highly visible hand of the federal government as a partner has given CEO Lip-Bu Tan additional time and money as he tries to pull off one of the toughest corporate turnarounds in recent memory.

HSBC: “The overall narrative from Intel management was much more bullish on several fronts including better non-AI server demand recovery, AI chip product strategy, as well as more optimistic tone on its foundry outlook going into [fiscal year 2026]. The bullish narrative vs last quarter’s analyst meeting is unsurprising as the recent deal announcements by the US government, Softbank, and Nvidia are likely to give Intel management a boost of confidence along with an improving balance sheet.”

JPMorgan: “Significant cash infusions in Q3/Q4 (Softbank, NVDA, US govt, Altera, MBLY) help to shore up the company’s balance sheet (de-levering remains a top capital allocation priority) while providing support for the company’s major capex initiatives amid fairly constrained [free cash flow] levels over the next several quarters. We still, however, view Intel’s competitive positioning as fundamentally challenged for the next 12-18 months.”