The positive narrative surrounding Intel (INTC) has been “carrying the day,” but the semiconductor company’s fundamentals may be starting to improve as well, UBS said.
“Despite supply that remains tight, we still see an upside bias for FQ4 results on PC [and] server demand strength and see Street numbers (which are about in-line w/normal seasonal) as okay for FQ1 (March) guidance — especially off the stronger Dec Q base,” UBS analyst Timothy Arcuri wrote in a note to clients. “Fundamentally, we see a mixed (albeit improving) picture this year, as CQ1 should also be the worst of INTC’s capacity issues (mix shift off Intel 10/7 to more volume for Granite Rapids (Intel 3) and ramp of Panther Lake (18A)).”
Despite that, Arcuri said that memory price increases could halt some of the recent momentum in PC sales. “If INTC guides 2026 revenue (unlikely), we would see low single digits as a reasonable (if not conservative) bar but expect some broader commentary on gross margin (drop-through 40-60%, UBS [estimate] full year ~38%), gross/net capex (UBS [estimate] ~$19B/~$12B or both up slightly Y/Y), and opex $16B (in-line w/ prior guide),” Arcuri explained.
Arcuri has a Neutral rating on Intel, but upped his price target to $49 from $40, on the improving fundamentals. He pointed to the belief that there may be “several” potential external customers — Nvidia (NVDA) (for gaming), Apple (AAPL) (for its M-Series chips), Google (GOOG) (GOOGL), and Broadcom (AVGO) — that may have engaged with Intel on its 14A manufacturing process.
“Momentum on the 14A narrative should start to build once the PDK for the engineering version of the process is out (we think this Q) and PDK 1.0 is released more toward year-end (this would enable customer designs by 1H:28, now only ~2yrs out),” Arcuri added.
Additionally, Intel may see continued strength in its data center and PC businesses, as the company reiterated a “strong demand environment” for both at UBS’ investment conference in December.
“Given the limited supply on INTC 7/10 nodes, the company is de-emphasizing lower-end PC products which we think will offer near-term tailwinds for the Client business,” Arcuri explained. “While we remain bullish on Data Center demand (UBS forecasts traditional servers growing 6% [year-over-year]), we believe PC demand may moderate from increasing memory pricing given memory accounts for 25-30% of PC BOM. UBS recently revised PC growth forecasts for C2025E/2026E to 7%/-4% from prior 4%/3% and another 2% growth [year-over-year] in C2027E. Total PC units are expected to decline 8% and 8% in [the December quarter and March quarter], but we expect INTC revenues to outperform PC units in [the December quarter] as it benefits from a richer mix.”
Intel will report fourth-quarter results on Jan. 22. A consensus of analysts expect the company to earn $0.08 per share on $13.37B in revenue.