Intel Earnings: A Stellar Quarter With Agentic AI Tailwinds

Key Morningstar Metrics for Intel

• Fair Value Estimate
  : USD 60
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Intel’s Earnings

Intel INTC reported first-quarter revenue of USD 13.6 billion, up 7% year over year and well above the high end of guidance of USD 12.7 billion. Intel expects June-quarter revenue of USD 14.3 billion, up 11% year over year and above FactSet consensus estimates of USD 13.1 billion.

Why it matters: Intel reported a blowout quarter, not just with higher revenue but also with an impressive adjusted gross margin that beat guidance by 650 basis points to 41%.

• Server processors, or CPUs, were in high demand thanks to the rapid rise of agentic artificial intelligence, and Intel couldn’t meet the demand, missing out on at least USD 1 billion in sales in the quarter. Our fears heading into the quarter that such strength would be offset by PC CPU weakness did not materialize.
• Client computing group, that is, PC, revenue rose 1% year over year and fell only 6% sequentially, ahead of normal seasonal patterns despite Intel shifting PC production over to server CPUs. Supply should continue to improve for all products as Intel ramps its 18A process node.

The bottom line: We raise our fair value estimate for no-moat Intel to USD 60 from USD 32. We raise our near-term revenue and gross margin estimates as Intel capitalizes on high server CPU demand, while we lift our long-term revenue estimates as Intel captures at least one 14A manufacturing customer with Tesla.

• Shares rose 52% in the past month (versus 8% for the Morningstar U.S. Market Index) prior to earnings and rose another 20% after hours to the USD 80 range with the strong earnings report.
• We’re encouraged by Intel’s progress in both products and foundry, but still think this run-up is a bit too much. We caution that Intel has not yet brought 14A to market, has high exposure to low-growth PCs, and faces stiff competition in server CPUs from AMD and Arm-based vendors.