HSBC Cuts Intel Price Target, Keeps Hold

HSBC analyst Frank Lee lowered the price target on Intel (NASDAQ: INTC) to $21.25 (from $22) while maintaining a Hold rating.

“2Q25 earnings miss despite revenue beat: Intel’s 2Q25 revenue of USD12.9bn beat HSBCe/ Visible Alpha consensus of USD11.8bn/USD11.9bn and exceeded management guidance range of USD11.2-12.4bn.

However, Intel recognized USD800m of impairment charges and USD200m of one-time period costs, which led to an 800bp negative impact on GM.

2Q25 GM of 29.7% was significantly lower than HSBCe/consensus/management guidance of 36.5%. The lower margins led to an EPS of -USD0.10, much lower than HSBCe/consensus of USD0.02.

3Q25 earnings guidance misses as margin contraction continues: Intel guided 3Q25 sales to be in the range of USD12.6-13.6bn, implying 2% q-o-q increase.

The revenue guidance implies a sub-seasonal 2H25 due to stronger than usual 1H25 driven by tariff-related uncertainties.

3Q25 GM guidance of 36% was in line with our estimates of 36.3% but missed consensus estimates of 37.2%. Excluding the 2Q25 impairment and one-time period costs, 2Q25 GM would have been 37.5%.

Hence, the 3Q25 GM guidance implies continuous GM contraction amid margin pressure driven by product mix, in our view.

Due to lower margins, the EPS guidance of USD0.00 was also lower than HSBCe/consensus of USD0.05.

Cautious foundry narrative and capex cut: In our 15 July preview note, we highlighted that Intel would focus on its next-gen 14A node for external customers instead of 18A.

The CEO acknowledged the same confirming that the focus for 18A will be to ramp it with their upcoming Panther Lake CPU.

Given the increased capital cost for 14A, Intel wants to proceed with it only if they get volume commitments from both internal and external customers.

In line with these cautious remarks, Intel expects 2026 capex to be lower than 2025 net capex of USD8-11bn.

Additionally, while Intel continues to retain market share in traditional data center servers, the company is not confident about gaining share on the back of the current product roadmap.

With the outlook for two out of the three major business segments uninspiring, we continue to remain cautious.

Retain Hold; cut TP to USD21.25: We revise down our 2025/2026 EPS estimates to USD0.10/USD0.56 (from USD0.31/USD0.93) reflecting the earnings miss and cautious narrative amid GM pressure.

Our lower target price of USD21.25 (previously USD22.00), based on unchanged 0.8x 2026e P/B, implies downside of c6%. We reiterate our Hold rating.

While we remain cautious about 2H25 and 2026, we expect the resilient client performance and opex management should help support revenue growth and margins. See page 5 for key risks.”

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