Intel (NASDAQ:INTC) will come under close watch next Thursday (October 23), when the chipmaker reports its third-quarter results. The upcoming readout comes amid renewed optimism around the company, with the stock up by ~64% since July’s Q2 earnings call, boosted by mega deals with Nvidia, SoftBank, and the U.S. government.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Susquehanna’s Christopher Rolland, an analyst ranked among the top 3% of Street stock experts, anticipates the results will come in roughly in line with expectations, although the guide is likely to disappoint due to the loss of Altera’s contribution following its sale.
Recall, Intel’s sale of a 51% stake in Altera closed on September 12, meaning the company will only recognize Altera’s performance through September 11 and will subsequently record its remaining minority interest using the equity method. Rolland reckons the sale will reduce revenue by about $75 million in Q3, with the full quarterly impact of ~$450 million reflected in Q4 once Altera is fully deconsolidated. Since Altera’s gross margins (around 55%) exceed Intel’s corporate average, the analyst expects this to pressure consolidated margins by about 80 basis points in Q4.
As for the rest of the business, Rolland thinks tariff-driven PC pull-ins might have carried over into Q3, as ODM shipments are coming in stronger than anticipated – though this could create some headwinds in Q4. Importantly, says Rolland, the ramp of AI-enabled PCs is gaining momentum: Lunar Lake (LL) grew 4% quarter-over-quarter to ~6% of Intel-based laptops, while Arrow Lake (AL) rose 5% sequentially to about 7% of laptops. This ramp should support ASPs (average selling prices), but Rolland expects gross margins to remain under pressure since LL and AL have lower margins due to higher costs from external tiles.
For the Server business, ongoing share losses to AMD in the Enterprise segment (notably Dell) and among U.S. hyperscalers are “likely to weigh.” Although Intel remains the preferred AI head node for DGX and similar systems, Rolland is concerned about the continued shift toward ARM with GB200/300, even if the recent Nvidia partnership could be a “longer-term positive.”
On the Foundry side, CEO Lip-Bu Tan indicated that Intel might cancel the 14A node if it cannot secure a “significant external customer,” though recent checks point to “positive momentum” for 18A.
Looking ahead, margin expansion “remains at risk,” as the Altera contribution drops out, Server growth slows, and LL/AL “continue to ramp.”
“In short,” the 5-star analyst summed up, “we expect Intel to post generally in-line results, but weaker guidance reflecting the loss of Altera’s contribution, tariff-related PC pull-ins fading, and share losses to ARM-based Server CPUs and AMD in PC/Server.”
To this end, Rolland assigns INTC shares a Neutral rating and a $31 price target, which implies ~17% downside from the current share price. (To watch Rolland’s track record, click here)
His cautious stance reflects a broader sentiment on the Street. Most other analysts also remain on the sidelines ahead of earnings; based on a mix of 26 Holds, 6 Sells, and 2 Buys, the stock carries a Hold (i.e., Neutral) consensus rating. Many likewise believe Intel’s recent rally has outpaced its fundamentals – the $28.31 average price target suggests a ~24% potential pullback over the next year. (See INTC stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.