Intel reported its Q3 earnings on October 23.
Throughout the earnings name, Intel CFO David Zinsner addressed essentially the most crucial query: How good are the yields for the corporate’s 18A node (manufacturing course of)?
“I would say the yields are adequate to address the supply, but they are not where we need them to be in order to drive the appropriate level of margins,” Zinsner mentioned. “By the end of next year, we’ll probably be in that space. Certainly, the year after that, I think they’ll be in what would be kind of an industry-acceptable level on the yields.”
He continued by commenting on the next-generation 14A node:
“If you look at Intel 14A in terms of its maturity relative to Intel 18A at that same point of maturity, we’re better in terms of performance and yield. We’re off to an even better start on Intel 14A.”
Listed here are the Intel Q3 earnings highlights:
- Income was $13.7 billion, up 3% 12 months over 12 months (YoY)
- Diluted earnings per share (EPS) attributable to Intel of $0.90
- Gross margin of 38.2%, in comparison with 15% in Q3 2024
- Web earnings of $4.1 billion, in comparison with a web lack of $16.6 billion in Q3 2024
The corporate offered an outlook for This fall 2025:
- Income within the vary of $12.8 billion to $13.8 billion.
- Gross margin of 34.5%.
- Diluted loss per share attributable to Intel $0.14.
- Steerage excludes Altera, following the sale of a majority possession curiosity accomplished within the Q3 of 2025.
Intel’s fabs will want plenty of time to get industry-acceptable degree yields for his or her superior node.
Picture supply: image alliance/Getty Pictures
Financial institution of America lowers Intel professional forma EPS estimate for 2026
Following the discharge of the earnings, Financial institution of America analyst Vivek Arya and his staff up to date their opinions on Intel (INTC) inventory.
Analysts mentioned that excluding Altera, Intel beat Q3 gross sales estimates by 4% and raised its This fall outlook by 3% on encouraging (Home windows 11 refresh) CPU calls for throughout each PCs and servers. The corporate highlighted that demand exceeds provide, a development that might proceed into 2026.
The staff famous Intel’s key challenges:
- Gross margin strain: Intel’s steerage is ready to 36.5% for This fall, however analysts estimate {that a} full-fledged EPS restoration requires a gross margin larger than 45%.
- Powerful competitors in each Merchandise and Foundry.
- Subscale manufacturing with no massive exterior buyer wafer order.
- Lack of an AI accelerator.
The staff lowered its professional forma EPS estimates for 2026 by 4% to $0.51 and saved its estimates for 2027 at $0.77.
“Importantly, we don’t expect a material improvement in the current unfavorable cost structure for Intel Foundry, given slow internal adoption of 18A node (peak capacity in 2030+) and foundry competition in the U.S.,” Arya mentioned.
He defined that Intel inventory, buying and selling at a 50 a number of price-to-earnings estimate for calendar 12 months 2027, is overvalued. Arya reiterated an underperform ranking and a value goal of $34, based mostly on a 3.0 a number of of his enterprise value-to-sales ratio estimate for 2027, in step with the historic vary of 1.7 to 4.
In response to the staff, draw back dangers for Intel are:
- Decrease than yield/ramp at Intel Foundry, significantly for its new 18A and upcoming 14A nodes
- Lack of fabric exterior foundry buyer in wafer processing
- Weaker-than-expected developments in a mature PC market, which is the biggest income generator for Intel
- Accelerated share loss to main CPU opponents
Upside dangers are:
- Key exterior foundry packaging/wafer offers that might considerably enhance gross sales/utilization
- Higher-than-expected yields/ramps at 18A and upcoming 14A nodes, leading to higher gross margin/utilization profile
- Stronger-than-expected PC market from Home windows 10 refresh or AI uplift
- Geopolitical tensions boosting sentiment for home manufacturing property
Bernstein analyst additionally thinks Intel is overvalued
Intel noticed enormous investments this 12 months. However with a lucky (for Intel) finish to Home windows 10 pushing folks to purchase new PCs, and a latest rumor that Intel is slated to fabricate Microsoft’s Maia 3 chip codenamed “Griffin” utilizing the 18A or 18A-P course of, the corporate has a protracted street forward to restoration.
CFO’s feedback on yields aren’t excellent news for Intel, as an industry-acceptable degree of yields is not more likely to occur anytime quickly. The remark explains why most firms are reluctant to decide on Intel’s fabs for manufacturing.
Extra Tech Shares:
- Senior analyst lifts Palantir inventory value goal with a catch
- Nvidia simply scored an enormous AI win, however CEO Huang has regrets
- Apple’s iPhone 17 story simply took an surprising flip
- Analysts revamp Salesforce inventory forecast after key assembly
Bernstein analyst Stacy Rasgon just lately wrote in his observe on Intel: “The real bull case right now seems to be that Trump wants the stock to go up.” He reiterated ranking market-perform (equal to carry) with a value goal of $21.
Let’s hope Intel makes a breakthrough and achieves an industry-acceptable degree of yields a lot earlier than anticipated.
Associated: Financial institution of America revamps IBM inventory value after earnings
