$INTC · Jose Najarro Stocks · 2026-10-30

Intel also reported earnings. The stock is down roughly 23% after hours. Yes, that's two three losing more than a fifth of its valuation in one day.

Then Intel even though the stock is down they did show strong server demand. Uh unfortunately they do not they have some supply issues to say the least.

Now, I want to jump into Intel, right? Intel reported earnings and unfortunately, we saw the stock was down roughly 24%. One of the main reasons, in my opinion, was quarter 4 outlook felt shorter than expectations.

They gave at mid.5 billion. the market was expecting something around 17 billion dollars. So, a massive massive hit.

Now, the company did mention that a few reasons. First is the consumer market is seeing extreme weakness because of the PC correction, right? We're seeing memory prices continue to go up.

People are not buying those crazy prices on on on consumer goods, right? We've seen certain laptops go up in prices dramatically due to memory. So, that's creating a massive headwind in the overall consumer space.

Now, the other reason why guidance had a bit of a reset is they are having an incident an accident in an Israel plant Fab 22. Fab 22 because of this it is disrupting their 10 nanometer supply and that 10 nanometer is for server CPUs.

It's costing them about $300 million in revenue for this quarter in guidance about 200 basis points gross margins. So that is creating that bit of a bit headwind for the company.

Right? So you're getting two double whammy is you're getting the weakness in consumer. You're also seeing the fab 28 accident and they're also seeing product mix pressure or margin.

So you're seeing certain solutions that you're getting higher cost because of things like memory.

Now, Intel's data center revenue is doing actually extremely well, right? Up 78% year-over-year. I believe if they didn't have this incident and they would have kind of given the strong guidance, the market would have loved it because the AI story does seem to be paying out here for Google, especially in the CPU space.

But that is the double-edged sword, right? We're kind of hearing this CPU shortage in the industry. How can you be experiencing a CPU shortage in the industry, but you're also not expected to grow sequentially?

And I think that's where the market is really fearful for Intel.

Now, Intel did talk a lot about supply, right? They're seeing massive supply issues. Intel, they're even trying to build bring additional equipment. Intel 3 tools in Ireland. Uh they have a lot of server CPUs in Intel 3, 18A ramp in Oregon, Arizona.

Uh they have their new server CPUs are being built in 18. And like we saw the Intel 10, um which is the one in FAP 28 in Israel. That's the one that's taking a bit of a hit.

Uh in the second half of 2027, they are actually shifting some of their production lines, right? Some of the production lines of 18A, which was mainly used for consumer in that Oregon plant, is actually being shifted to Intel 3, which has more server products.

So, Intel right now is completely shooting away the consumer market, even in their supply chain, to be able to try to increase their server output.

And they do believe by the second half of 2027, still some time, they are going to get more substrate capacity outside of just the supply chain traditional line that they're seeing a bit of a supply constraint.

Some of the big things that they mentioned was advanced packaging. Advanced packaging is a massive constraint right now and those substrates as well for the advanced packaging solution.

So if you are uh investor, those might be some places you want to take a closer eye on because that's what other players have also said.

Intel believes the market is going to be supply constraint 2027 and 2028. Uh so very bullish indication there for the overall market. Now one thing that I I kind of thought that sucked for Intel and might be bullish for AMD.

Would love to hear your thoughts is all of Intel's server CPU business are done in their internal manufacturing line. For AMD everything is done in TSMC and TSMC is not having any delays. expanding capacity like crazy.

Now, the CPU market is so crazy that Intel's CEO did mention that people are interested in signing up to long-term agreement right now, right? Long-term agreements. This is something we're hearing right now in the memory space.

Typically, you don't see this in the CPU space, and they are more of a take or pay provision disclosed pretty much in the answer of the Q&A session, but I I I think this really kind of showcases where we are in the CPU shortage.

Uh they even mentioned that the business in the CPU market can grow to a total addressable market of nerf of $200 billion within the next 5 years. Kind of similar numbers to what Lisa Sus said and pretty much the main thing driving any form of revenue growth is overall supply.

So Intel does have some positive first clear water forest is generating revenue on Intel 18A that is their Intel 18A server CPU. In 2027, they have Diamond Rapids coming in on 188P.

They also have collaboration and planned with Oracle Cloud Infrastructure for X14 systems. and further opportunity they continue to grow in the foundry space. Advanced packaging supply improves, 18 yields improve, 14A customer potentially happens, external orders also happen and just the economics of utilization of their fab increases and can be an opportunity for them.

So there's a lot of things there. Again, the main issue is Intel does not have the supply to be able to meet the demand. For that reason, Intel does expect 20 billion in gross capex in 2026 with expected a substantial increase in 2027.

CFO even warned investors that they do not expect to be free cash flow in 2027 as investment rises and unfortunately they also see that the memory market is going to continue to see tightness through 2027 impacting the PC recovery.

So, Intel, yeah, right down 20 something%. Outside of valuation, I don't know if valuation was the main reason, but earnings weren't that horrible. It's just supply isn't the issue.

And at the moment, I do believe we're going to see AMD take a nice portion of the share that Intel is missing out on.