Intel (INTC) stock remains under pressure, trading at relatively low levels as its investment appeal is undermined by intense competition, ongoing struggles in its foundry business, and broader macroeconomic challenges, including additional tariffs. Following a mixed Q1—where revenue reached $12.7 billion but an $800 million net loss disappointed investors—attention now turns to its Q2 results, set to be released after tomorrow’s market close, which are expected to highlight continued difficulties.
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Despite this, the stock remains a polarizing proposition. Some see it as a bold turnaround opportunity under new CEO Lip-Bu Tan, while others view it as a potential value trap. Q2 may offer clearer insight into which direction Intel is truly heading. With so much uncertainty in the air, risk-averse investors like me are keeping a Neutral stance until further clarification is provided — quite possibly at tomorrow’s earnings call.
What’s Dragging Intel Down?
To better understand Intel’s current situation, let’s briefly examine its latest results, which highlight the key challenges keeping its shares under pressure. Specifically, despite what is a clearly booming semiconductor industry, driven by AI and data center demand, Intel’s revenue was flat YoY at $12.7 billion. The company also reported earnings of $0.13 per share, which was weighed down by higher costs and write-downs.
The client computing group, which includes PC chips, saw an 8% revenue drop to $7.6 billion, reflecting soft demand. The foundry business, a key part of Intel’s pivot to manufacturing for others, reported $4.7 billion in revenue but continues to bleed money, with operating losses raising concerns about its overall scalability.
CEO Lip-Bu Tan, who took the helm in March, acknowledged on the Q1 earnings call that there are “no quick fixes,” pointing to a culture shift and cost-cutting as critical steps to regain market share.
Unlike other companies in the space, such as Nvidia (NVDA), which thrives on AI, Intel’s lag in this area has hurt its competitive edge. It feels like it’s “too late” for the company to catch up in AI, all while trade tensions, particularly China’s retaliatory tariffs on U.S. chips, also loom large. Just imagine Intel’s sales to China, its largest market, potentially facing 85% levies. It’s no wonder these company-specific struggles, against a backdrop of industry growth, have kept Intel’s stock under pressure.
Q2 Results Likely to Confirm Further Headwinds
Given the shaky ground Intel is currently standing on, analysts are bracing for another challenging quarter in Q2, with Intel guiding revenue between $11.2 billion and $12.4 billion, below Wall Street’s $12.82 billion estimate, and adjusted EPS at breakeven, missing the expected $0.06.
This cautious outlook, shared on the Q1 earnings call, stems from macroeconomic uncertainty and potential tariff impacts, which CFO David Zinsner flagged as increasing recession risks. The data center and AI segment, despite an 8% Q1 uptick, is expected to decline faster than the client computing group in Q2. At the same time, foundry revenue may dip due to lower wafer volumes and capacity constraints in Intel’s 7nm process.
Industry dynamics aren’t helping either. While AI demand fuels growth for some, Intel’s reliance on legacy products and its slow foundry ramp-up can make anyone skeptical about the company’s prospects. Now, analysts have updated their estimates to a gross margin of 36.5%, down from the 39.2% in Q1, reflecting a shift toward lower-margin client products.
Thus, consensus revenue estimates indicate a 7.4% decline to $11.9 billion and EPS of just $0.01, aligning with management’s break-even forecast. Investors are eager for updates on foundry customer wins and AI progress in Q2, but the consensus suggests Intel’s turnaround is still a work in progress.
Is Intel a Value Play or a Trap?
Intel’s prolonged share price decline may suggest a deep value opportunity, especially for a company long regarded as a blue-chip stalwart—making it an intriguing pre-earnings pick. However, significant risks remain. Ongoing losses in its foundry division, intense competition from TSMC (TSM) and Nvidia, and looming tariff threats could continue to pressure margins.
While the $7.86 billion in CHIPS Act funding offers crucial support, successfully scaling advanced nodes like 18A—targeted for production in late 2025—is far from guaranteed. Negative free cash flow and persistent concerns over profitability only heighten investor caution. That makes Intel’s Q2 earnings a potential inflection point: a beat on guidance or encouraging foundry progress could restore confidence, while disappointing results might deepen skepticism.
Is INTC a Buy, Sell, or Hold?
On Wall Street, INTC stock carries a Hold consensus rating based on one Buy, 25 Hold, and four Sell ratings over the past three months. INTC’s average stock price target of $22.10 implies almost 5% downside potential over the next twelve months.
Intel’s Q2: Turning Point or Further Trouble Ahead?
Intel’s Q2 report may not provide all the answers, but it’s likely to bring greater clarity. With the stock already reflecting a bearish outlook, even modest signs of progress—whether in foundry development, AI positioning, or cost control—could revive investor optimism. That said, the company’s underlying challenges run deep, and any disappointment in the numbers could quickly dampen sentiment. For now, Intel walks a tightrope between a high-risk turnaround story and a potential value trap, and Thursday’s results may tip the balance one way or the other.