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Intel (NASDAQ:INTC) shares tumbled during early market trading on Friday as the semiconductor firm continues to find its footing in foundry while losing market share to rivals such as AMD (NASDAQ:AMD).
The Santa Clara, Calif.-based Intel reported its second quarter results and outlook on Thursday evening. Revenue exceeded market expectations, while earnings per share were weaker than the consensus due in part to restructuring charges. Shares were down more than 8% by Friday morning. This followed a 3.6% decline on Thursday.
Analysts surmised that tariff pull-ins contributed in part to the stronger than expected revenue as Intel CEO Lip-Bu Tan continues to try and turn the company around.
“One of the most important aspects is that Lip-Bu has finally made a decisive move regarding Intel’s IDM/foundry strategy by stating that they will not proceed with the next gen 14A manufacturing node (and future nodes) without securing a significant external foundry customer – potentially signaling a move to a more fabless model in 3-4 years,” said J.P. Morgan analysts Harlan Sur and Peter Peng, in a Friday note. “While we view this as a positive step, customer decisions on 14A node adoption won’t be made for another 18-24 months. In the meantime, Intel will continue to burn cash and concede more market share in the PC client and server business to AMD.”
J.P. Morgan identifies near-term risks, such as customer pull-in purchases falling off and gross margins continuing to drop below 40%. The bank reiterated its underweight rating on the stock but nudged the price target up to $21 from $20.
Morgan Stanley also said that gross margins will remain under pressure due to the effects of 18A startup costs and the Lunar Lake ramp.
“Both of those headwinds seem likely to persist into next year, and should the PC market soften that and lower volumes won’t be a pleasant combination,” said Morgan Stanley analysts, led by Joseph Moore, in a Friday note. “Those prospects seem likely to temper enthusiasm for any near-term V-shaped fundamental recovery even with the company reporting its first positive y/y revenue quarter since Q1 2024.”
Morgan Stanley retained its Equal-weight rating and $23 price target following the results.
Meanwhile, KeyBanc analysts said they were encouraged by the results and the potential for a turnaround. The bank has assigned a Sector Weight on the stock and no price target.
“All things considered, we’re encouraged by these results, and are modestly raising ’26E despite lowering ’25E,” said KeyBanc analysts John Vinh and Ryan Rosumny, in an investor note. “However, we remain SW, as we expect a potential turnaround to take some time.”
Price action from competitors was mixed on Friday. AMD had inched up 0.5%, and Nvidia (NVDA) was down 0.4%.