Intel Earnings to Test 185% Stock Rally Fueled by AI Hopes

Intel's upcoming earnings report on Thursday will serve as a critical test for its massive stock rally, which has seen shares nearly triple in value this year on the back of investor optimism around its turnaround strategy and the booming demand for artificial intelligence hardware.

Analysts expect the chipmaker to report its most rapid quarterly revenue growth in approximately six years, driven by a rebound in demand for central processing units (CPUs) that are integral to powering AI applications.

Analyst Expectations

According to consensus data compiled by LSEG, Wall Street is anticipating a strong performance for the second quarter, with several key metrics in focus:

• Revenue: Forecasted at $14.42 billion, which would represent a 12.1% increase from the same period a year earlier.
• Adjusted Earnings: Expected to be 21 cents per share.
• Data Center and AI: This key segment is projected to grow 36.4% to $5.37 billion.

However, profitability remains a concern. The company's adjusted gross profit margin is expected to be 38.8%. Analysts at TD Cowen have noted that margins remain under pressure due to significant investments in Intel's foundry business and the high costs associated with ramping up new manufacturing processes.

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Foundry Business in the Spotlight

Investors will be eager for updates on Intel's contract manufacturing division, which has been gaining momentum with deals such as a tie-up with Tesla. A key point of interest is a potential manufacturing deal with Apple, which was mentioned by U.S. President Donald Trump in April but has not been confirmed by either company. Securing Apple as a foundry customer would be a major validation of Intel's manufacturing capabilities.

Despite the positive narrative, analysts caution that fundamental challenges persist. "We admit to feeling better about the company than we have in some time as both the market and narrative grow more supportive, though fundamentals overall still remain somewhat on the challenging side," Bernstein analysts said in a note.

Market Context

While Intel's stock is up 185% year-to-date, it has experienced a recent pullback, declining more than 25% from its record close on June 22 amid a broader selloff in semiconductor stocks. The company continues to navigate headwinds, including weaker demand in the traditional PC market and margins that are still well below its historical highs.