Intel 1Q26 beat expectations, but valuation already reflects long-term EPS improvement; Deutsche Bank maintains Hold

Overview

This report is Deutsche Bank's review of Intel's 1Q26 results and 2Q26 guidance. The core conclusion is that earnings quality improved meaningfully, with server CPU demand, product business revenue, gross margin, and progress in advanced process technology all acting as positives; however, PC demand, rising expenses, and margin pressure from the Panther Lake ramp in 2H remain limiting factors. The report maintains a Hold rating while raising the target price to $63.

Core views

Deutsche Bank believes that this quarter's “positives outweigh the negatives.” On the positive side, 1Q26 revenue and 2Q26 guidance were both about 10% above Deutsche Bank's expectations, both DCAI and CCG exceeded forecasts, 18A yield improvements and confidence in the 14A roadmap increased, and gross margin was also significantly above guidance. On the negative side, PC demand may weaken in 2H26, putting pressure on CCG, which accounts for about 55%-60% of company revenue, and 2026 operating expenses could exceed the company's prior target of about $16 billion. Overall, long-term EPS power has been revised upward, but after the current share price rebound the risk/reward is becoming more balanced.

Analysis framework

The report uses an earnings review framework, comparing 1Q26 actual results, Deutsche Bank's prior forecasts, consensus expectations, and company guidance side by side, while breaking down revenue and growth by segments including CCG, DCAI, Intel Foundry, and Mobileye. On valuation, Deutsche Bank derives the $63 target price using roughly 18x long-term normalized EPS power of about $3-4, while also incorporating upside and downside risk considerations into the rating.

Methodology notes

• earnings_reviewactual_vs_estimate_and_guidance

  Earnings, expectations, and guidance comparison

  By comparing 1Q26 actual revenue, gross margin, and EPS with Deutsche Bank's expectations, market consensus, and company guidance, the report assesses whether this quarter's results constituted an upside surprise.

• segment_analysisbusiness_segment_breakdown

  Segment revenue and growth breakdown

  It examines demand strength, year-over-year, and sequential trends across segments such as CCG, DCAI, Intel Foundry, and Mobileye to identify marginal changes in server CPUs, PC CPUs, and foundry operations.

• Valuation methodseps_power_multiple

  Long-term EPS power multiple valuation

  Deutsche Bank raised long-term normalized EPS power from about $2-3 to about $3-4 and applied an approximately 18x valuation multiple to arrive at the $63 target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• INTC.US

  Research subject, company's common stock

  Strengths

  1Q26 revenue and gross margin significantly beat expectations; strong DCAI server CPU demand; improved 18A yields and cycle time; stronger signals on 14A internal product allocation and external partnerships; long-term EPS power revised upward.

  Weaknesses

  PC demand may weaken in 2H26; CCG accounts for about 55%-60% of company revenue, giving it a large impact on total revenue; operating expenses may exceed the prior target; the Panther Lake ramp may pressure 2H26 gross margin.

  Comparison

  1Q26 actual revenue of $13.577b exceeded Deutsche Bank's prior forecast of $12.251b and company guidance of $12.200b; gross margin of 41.0% was above 34.5% guidance; the new 2026E PF EPS forecast of $1.15 was above the prior forecast of $0.45.

  Risks

  Risks include a semiconductor cycle slowdown, share loss, IDM 2.0 costs above expectations, insufficient IFS customer demand, and continued manufacturing execution missteps; upside risks include IDM 2.0 costs below expectations, accelerating business trends, market share gains, government support, and competitor execution mistakes.

Key data

• 1Q26 revenue$13.577bMeaningfully above Deutsche Bank's prior forecast of $12.251b, consensus of $12.359b, and company guidance of $12.200b.
• 1Q26 gross margin41.0%About 650 basis points above the midpoint of the company's 34.5% guidance.
• 1Q26 PF EPS$0.29Above Deutsche Bank's prior forecast of about $0.00 and company guidance of $0.00.
• 2Q26 revenue guidance$13.8b-$14.8b；midpoint $14.3bCompany guidance implies about 5% sequential growth, which Deutsche Bank believes may still be conservative.
• 2Q26 non-GAAP gross margin guidance39.0%Above Deutsche Bank's prior expectation of about 36%.
• 2Q26 non-GAAP EPS guidance$0.20The report presents the company's 2Q26 guidance.
• DCAI 1Q26 revenue$5.052b, +7% QoQ, +22% YoYDriven by strong server CPU demand and significantly above Deutsche Bank's prior expectations.
• CCG 1Q26 revenue$7.727b, -6% QoQ, +1% YoYBetter than Deutsche Bank's expectation of -15% QoQ, but PC demand may still weaken in 2H26.
• New 2026E revenue forecast$58.812bAbove the prior forecast of $53.953b.
• New 2026E PF EPS forecast$1.15Above the prior forecast of $0.45.
• Target price$63.00Based on about 18x long-term normalized EPS power of about $3-4.
• Current price$66.78As of April 23, 2026.

Impact & implications

For investors, this report reinforces the improvement narrative around Intel in AI server CPUs, advanced process technology, and gross margin recovery, and also implies that market expectations for Intel's long-term earnings power may move higher. However, because the target price is below the current price cited in the report, Deutsche Bank believes the incremental positives have already been largely absorbed by the recent rise in the share price, making the near-term investment implication more neutral.

Risks

• PC demand may weaken in 2H26, putting pressure on CCG growth.
• The Panther Lake and 18A ramps may weigh on company gross margin in 2H26.
• 2026 operating expenses may exceed the prior target of about $16 billion due to cost inflation, variable compensation, and continued investment.
• A cyclical downturn in the semiconductor industry could weaken revenue and profitability.
• IDM 2.0 costs could exceed expectations, and IFS customer demand could be insufficient.
• Manufacturing execution risk could still affect the progress of advanced process technology and customer confidence.

What to watch

• Whether actual 2Q26 revenue can exceed the midpoint of guidance at $14.3b.
• Whether DCAI server CPU demand continues, especially changes in the CPU-to-GPU mix in AI servers.
• The actual impact of 18A yields, cycle time, and the Panther Lake ramp on gross margin.
• Whether 14A internal product adoption and TeraFab partnerships translate into clearer customers or orders.
• 2H26 PC demand, CCG sequential trends, and the easing of supply constraints.
• Whether 2026 operating expenses remain persistently above the company's original target of about $16 billion.