Q2 Strength Is Real, but Foundry Economics Still Unproven

What happened

Intel's stock has nearly quadrupled over the past year, and the latest article asks whether to buy after that run, citing Q2 revenue up 25% to $16.1 billion, the strongest growth in over 15 years, and data center and AI operating income nearly quadrupling to $2.5 billion. However, consolidated operating income was only $1.8 billion because Intel Foundry still lost $2.1 billion in the same quarter. The market narrative has shifted to an AI-linked recovery, but the foundry business remains a drag, with external revenue of just $293 million and no significant 14A customer yet. Key upcoming catalysts include Q3 results and the October 14A PDK milestone, which will test whether the product momentum can extend to foundry economics. Until external foundry traction scales materially, the stock's valuation at 37x EBITDA leaves no margin of safety.

Implication

The article's focus on product strength does not change the fact that Intel's valuation already embeds a successful foundry ramp that has not yet materialized. Intel's EV/EBITDA of 37 and a share count above 5.0 billion after a $20 billion equity offering mean per-share economics are already stretched. The next six to nine months bring concrete tests: Q3 revenue must stay within $15.8-$16.8 billion with gross margin at or above 42%, and external foundry revenue must rise materially above $293 million while 14A PDK delivery stays on track. If any of these milestones slip, the stock is vulnerable to a sharp de-rating. A more attractive entry emerges below $82, or if Intel names a significant 14A customer and shows foundry losses narrowing.

Thesis delta

The new article reinforces the strength of Intel's product recovery, particularly in data center and AI, which aligns with our base case that server demand is robust. However, it does not address the critical foundry losses or the lack of external customer validation, which remain the core risks to the investment thesis. Therefore, our WAIT rating and conviction level of 4.0 remain unchanged.