Intel earnings may beat views as server demand, pricing rise
Intel is projected to surpass third-quarter earnings estimates on Thursday as surging server demand and improved pricing boost revenue, though broader semiconductor volatility may limit the stock's reaction.
Intel will report its third-quarter results after the market closes on Thursday, with Wedbush forecasting the chipmaker will comfortably exceed consensus expectations. The firm projects overall sales growth of more than 5% quarter-over-quarter, which aligns with current analyst estimates for the period.
Data center revenue is expected to act as the primary catalyst for the quarter. Wedbush models roughly 10% sequential growth and a 40% year-over-year surge in this segment, fueled by intensifying server demand from enterprise customers.
Average selling price increases across Intel's server portfolio are expected to account for a substantial portion of this revenue expansion. Furthermore, additional pricing actions are reportedly underway. As Intel ramps its PC CPU output on the advanced 18A process node, incremental production capacity is becoming available, which could push server revenue beyond Wedbush's baseline estimates.
Pricing power is also stabilizing Intel's traditional client computing segment. The company's initial outlook appeared aggressive given weaker PC demand and elevated costs. However, Wedbush noted that PC CPU prices have actually risen at a comparable pace to server products, supporting expectations for modest sequential revenue growth in the PC business.
On profitability, gross margins are likely to outperform previous expectations. Intel had officially guided for lower margins this quarter, pointing to the loss of a one-time benefit from selling previously scrapped inventory and the upfront costs associated with the 18A manufacturing ramp.
Despite those headwinds, Wedbush highlights faster-than-anticipated yield improvements across both the new 18A node and older manufacturing processes as a significant tailwind. When combined with the broader improvements in product pricing, these manufacturing efficiencies should help Intel deliver margin recovery ahead of schedule.
Sector sentiment clouds outlook
For investors, a strong quarterly print may not automatically translate into stock gains. Recent earnings season has demonstrated a disconnect in the semiconductor sector, where robust financial results from major chipmakers have frequently failed to lift their share prices.
This dynamic is being driven by macroeconomic uncertainty, lingering questions about the sustainability of data center capital expenditure, and anxieties surrounding China's rapid advancements in artificial intelligence. Consequently, Wedbush noted that the market's reaction to Intel's report will likely depend more on shifting investor sentiment than the company's actual financial performance.
Intel remains fundamentally well-positioned to capture ongoing demand for compute infrastructure, particularly for AI inference workloads. Still, Wedbush cautioned that the chipmaker's valuation makes it particularly vulnerable to the broader market forces currently dominating semiconductor trading.
