Intel Gets New Price Target After 'Important Milestone' and I'm Selling
The firm touted its positioning in the AI era as an esteemed Wall Street analyst increased his outlook.
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Shares of Intel (INTC) fell sharply overnight after reporting better than expected fourth quarter financial results but also issuing lighter than expected current quarter guidance.
CFO David Zisner, on Thursday evening, pointed out that ongoing CPU shortages (you thought it was just memory?) will leave inventories at their lowest point during the quarter, but will improve later on in 2026. Let's get into it.
For the three-month period ended December 27, 2025, Intel posted an adjusted EPS of $0.15 (GAAP EPS: -$0.12) on revenue of $13.674 billion. The adjusted earrings print decisively beat Wall Street's expectations. The top-line number did so as well, despite being "good enough" for a year-over-year contraction of 3.9%. Adjustments were made for stock-based compensation expense and income tax effect in nearly equal parts.
Taken from the press release, CEO Lip-Bu-Tan commented:
“Our conviction in the essential role of CPUs in the AI era continues to grow. We delivered a solid finish to the year and made progress on our journey to build a new Intel. The introduction of our first products on Intel 18A — the most advanced process technology developed and manufactured in the United States — marks an important milestone."
The CEO added, "Our priorities are clear: sharpen execution, reinvigorate engineering excellence, and fully capitalize on the vast opportunity AI presents across all of our businesses.”
Operations
As net revenue contracted 3.9% to $13.674 billion, the cost of those sales increased 0.6% to $8.731 billion. That dropped gross profit to $4.943 billion (-11.5%) as gross margin dropped from 39.2% to 36.1%. Once adjusted, gross margin dropped from 42.1% to 37.9%. Total GAAP operating expenses landed at $4.363 billion (-15.6%), leaving GAAP operating income of $580 million (+40.8%) as GAAP operating margin improved from 2.9% to 4.2%. However, once adjusted, operating margin dropped from 9.6% to 8.8%.
After accounting for interest, other income and expenses and taxes, GAAP net income/loss attributable to the firm printed at -$591 million, which works out to -$0.12 per fully diluted share. Once adjusted, net income wound up at $767 million (+35%), which worked out to $0.15 per fully diluted share, up from $0.13 for the year-ago period.
Segment Performance
- Client Computing Group generated sales of $8.193 billion (-6.6%), to produce an operating income of $2.209 billion (-30.8%)
- Data Center & AI generated sales of $4.737 billion (+8.9%), to produce an operating income of $1.25 billion (+234.2%)
- Intel Foundry generated sales of $4.507 billion (+3.8%), to produce an operating income/loss of -$2.509 billion (down from -$2.249 billion)
Guidance
For the current quarter, Intel forecast revenue of $11.7 billion to $12.7 billion, ringing the midpoint of the range well below the $12.53 billion that Wall Street had in mind.
The firm also projected a GAAP EPS of -$0.21 and an adjusted EPS of $0.00. Those estimates are considerably worse than the respective -$0.19 and $0.04 that analysts were looking for. This is the primary reason for the severe overnight pressure on the shares.
This risk is also why I told investors on Thursday morning that I would be taking some profits in INTC and suggested they follow suit after the stock grazed our $55 target price ahead of Thursday's opening bell.
Fundamentals
For the period reported, Intel generated operating revenue of $4.288 billion. Out of that number came net capex expenditures of $2.064 billion (after proceeds from government incentives and partner contribution) and $2 million in lease payments to leave free cash flow of $2.222B billion This was up from "free" cash flow of -$4.667 billion for the year-ago comparison when operating cash flow was much lower and capex spending was much higher.
Turning to the balance sheet, Intel ended the quarter with a cash position of $37.416 billion and inventories of $11.618 billion, resulting in current assets of $63.688 billion. Current liabilities ad up to $31.575 billion, which does include short-term debt of $2.499 billion. That makes for current and quick ratios of 2.02 and 1.65, respectively, which easily passes muster.
Total assets amount to $211.429 billion. Of this number, just 12.6% is labeled as either goodwill or other intangibles. I have no problem with that. Total liabilities less equity comes to $97.148 billion, including $44.086 billion in longer-term debt. I do not love that number but given the cash position and the improved cash flows, it should be manageable.
Anyone Else Notice...
...That 11 sell-side analysts rated at five stars (out of five) by TipRanks all increased their target prices for INTC since Thursday night? This includes John Vinh of KeyBank, who regular readers know I hold in high esteem. Vinh reiterated his "Buy" rating on the stock while taking his target price up to $65 from $60.
My Thoughts
No, I don't love the guidance. I do like the way cash flows are moving. I am OK with margin, and I totally like the way the balance sheet is starting to look. I won't be quick to evacuate this name. I am, however, very glad that we played defense ahead of the numbers and were public about it. Now, we have dry powder to deploy at a lower price point if that's what the chart tells us to do:
I think that I will try to add the portion sold ahead of earnings' close to the 21-day EMA (around $45) down to the 50-day SMA if pivot does not hold upon being tested from above. It will be a nice extraction of capital from a position I intend to maintain. That's what trading is all about. Given the size of this sell-off, I see no need to adjust my $55 target price at this time. It served us well on Thursday and it stands.
At the time of publication, Guilfoyle was long INTC equity.
