Intel's Revenue Beat Overshadows Persistent Foundry Losses and High Valuation Risk

What happened

Intel reported Q4 2025 revenue of $13.7B, beating expectations, but supply constraints limited full demand capture in the data center segment, revealing ongoing operational inefficiencies. The Foundry segment posted a $2.5B operating loss with external revenue stuck at $222M, highlighting the absence of significant commercial customers despite growing interest. Forward valuation exceeds 100x 2026 earnings, reflecting weak current profitability and reliance on EPS doubling by 2027 to justify multiples, which hinges on unproven foundry success. This quarter underscores the gap between internal technology ramps, like 18A, and external market validation, as losses persist and external revenue remains dominated by government projects. Intel's turnaround narrative thus remains contingent on converting technological advances into tangible commercial foundry wins, a milestone yet to be achieved.

Implication

Intel's revenue beat is a positive signal but does not address the core foundry profitability issue that drives long-term value. The persistent $2.5B quarterly loss in Foundry indicates that internal ramp costs are outweighing benefits, pressuring overall margins and delaying learning-curve relief. With external foundry revenue stagnant and dominated by government projects, the lack of commercial anchor customers remains a major red flag, undermining the investment thesis. The stock's premium valuation requires EPS to double by 2027, a feat contingent on successful external foundry scaling and margin recovery that faces significant execution risks. Therefore, investors should monitor upcoming quarters for signs of gross margin improvement and announcements of significant external foundry deals before considering entry, as current prices do not offer a margin of safety.

Thesis delta

The Q4 results reinforce the DeepValue report's 'WAIT' rating by confirming ongoing foundry struggles with no progress on external customer acquisition. This validates the thesis that Intel's valuation is disconnected from current profitability and dependent on future milestones, such as securing a significant commercial foundry customer, which remains uncertain. No material shift in the investment call is warranted; instead, the news underscores the need for patience until concrete evidence of foundry traction emerges.