Intel Corporation (NASDAQ:INTC) is set to report second-quarter earnings after Thursday's close, with Wall Street focused on whether robust server pricing can offset persistent losses in its foundry business. The chipmaker's stock has surged over 160% year-to-date, though it remains more than 30% below its June peak, reflecting investor optimism about an AI-driven recovery tempered by structural challenges.
Analysts project revenue of approximately $14.44 billion and adjusted earnings per share of $0.22, slightly above Intel's own guidance range of $13.8 billion to $14.8 billion and $0.20. Options markets are pricing a potential swing of 13.52% in either direction, underscoring the uncertainty surrounding the report.
Data Center Momentum Raises the Bar
Intel's Data Center and AI (DCAI) segment has been the primary driver of its turnaround narrative. In the first quarter, DCAI revenue rose 22% year-over-year to $5.1 billion, fueled by a 27% increase in average server processor prices, even as unit volumes declined 5% due to supply constraints.
Wedbush analyst Matt Bryson noted that the key question is not whether Intel will beat expectations, but how sentiment shifts post-earnings. He estimates data center sales could climb roughly 10% sequentially and 40% year-over-year, with double-digit price increases accounting for most of the growth. However, strong pricing is already baked into current estimates, meaning investors will seek evidence of improving unit volumes and easing supply bottlenecks.
Intel's forecast for adjusted gross margins of 39% in the second quarter, down from 41% in Q1, adds pressure. A beat driven solely by pricing rather than volume growth could raise concerns about sustainability.
Foundry Economics Remain the Fault Line
Intel Foundry reported first-quarter segment revenue of $5.42 billion, but only $174 million came from external customers. The unit posted a $2.44 billion operating loss, highlighting that most reported sales still reflect internal manufacturing for Intel's own product divisions rather than a mature third-party business.
KeyBanc analyst John Vinh took a bullish stance, raising his price target to $155 from $110 and maintaining a Buy rating. He estimated that yields on Intel's 18A process node improved to about 85% from 65% in the prior quarter, and supply-chain checks suggest 14A remains on track for mass production in the second half of 2028.
Intel's recent collaboration with Fortinet to develop a security processor using Intel's design and manufacturing capabilities offers a proof point, but no financial terms or production timeline were disclosed. As a result, the agreement does not yet demonstrate that foundry returns are improving.
Guidance Will Determine the Rally's Fate
Third-quarter guidance will be critical. Investors need to see that stronger processor demand can lift margins while Intel continues to fund factory construction and advanced process development. UBS raised its target to $121 from $83 while retaining a Neutral rating, citing data center demand and potential pricing gains, but also emphasizing the need for updates on manufacturing execution and external foundry customers.
Intel's planned job cuts within its data center group could support expenses, but they also underscore how aggressively management is reshaping the business. The bullish scenario combines faster data center growth, margins above guidance, improving 18A economics, and firmer external commitments. The bearish outcome is a server-led beat accompanied by weak margins, supply constraints, or continued ambiguity around foundry profitability.
As Intel reports, the broader semiconductor sector has shown signs of a rebound. The Dow surged 384 points recently as chip stocks rallied ahead of big tech earnings, and another 230-point gain followed as the sector continued to recover. Intel's results could either reinforce or undermine that momentum.
This article is for informational purposes only and does not constitute financial advice.
