JPMorgan maintains Underweight on Intel despite raising earnings forecasts and target price

Overview

This report is JPMorgan's review of Intel's 1Q26 results and 2Q26 outlook. The report believes Intel's near-term performance was clearly better than expected, mainly driven by supply improvement, strong DCAI demand, improving 18A yields, and some inventory-related benefits; however, these improvements are not enough to change its view that Intel may underperform relative to the industry.

Core views

The core view is that DCAI and server CPU demand are in an upcycle, and 18A yield progress has also been better than previously feared, but Intel still faces server CPU share loss, CCG demand being masked by inventory replenishment, 2H gross margin cost pressure, rising OpEx, and uncertainty around the timing of Foundry break-even. Therefore, despite raising its valuation base and earnings forecasts, the report maintains Underweight.

Analysis framework

The report reaches its investment conclusion through comparing results with market expectations, breaking down segment revenue and operating margins, analyzing 2Q26 guidance, revising CY26 earnings forecasts, comparing peer valuation multiples, and assessing relative performance over the next 12-18 months.

Methodology notes

• Valuation methodsPeer multiple valuation

  The target price is derived based on an exit earnings power of about $1.40 in 2026 and a peer multiple range of 25-30x or 25-35x.

  The report raises the target price from $35 to $45, but believes there is no upside relative to the current share price, so the rating remains Underweight.

• Earnings analysisSegment operating breakdown

  It separately evaluates the contributions of CCG, DCAI, Intel Foundry, and other businesses to revenue, margins, and growth quality.

  DCAI is viewed as a genuine area of strength, CCG improvement is seen as more driven by inventory restocking, and Foundry remains deeply loss-making.

• Relative rating12-18 month relative industry performance

  Underweight reflects a view relative to the industry group, rather than a call that the stock price must fall in absolute terms.

  The report expects the semiconductor group as a whole may rise, and Intel may also participate, but its gains could lag peers.

Asset mapping & comparison

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

• INTC.US

  Core covered name

  Strengths

  Strong DCAI demand, with server CPU TAM expected to maintain double-digit growth in CY26 and CY27; improving 18A yields, with 1Q26 gross margin and EPS materially above expectations; the ASIC business offers long-term optionality.

  Weaknesses

  CCG improvement is mainly dependent on inventory restocking; server CPU faces competition from AMD and ARM-based hyperscaler silicon; Foundry losses remain large and the break-even timeline could move out; free cash flow and capital intensity remain pressure points.

  Comparison

  The report believes Intel may underperform semiconductor peers over the next 12-18 months; even if the sector as a whole rises, Intel's participation may be slower.

  Risks

  If Intel executes its technology roadmap better than expected, if PC and server markets recover faster than expected, or if Intel Foundry sees materially stronger external customer adoption, these could create upside risk.

• AMD.US

  Key competitor and peer reference

  Strengths

  It continues to pressure Intel in server CPU and data center competition.

  Weaknesses

  The report does not provide a full fundamental analysis of AMD.

  Comparison

  AMD is cited as one of the key sources of Intel's server CPU share loss risk and also appears in JPMorgan's semiconductor coverage peer valuation table.

  Risks

  If Intel's roadmap improves or supply recovery exceeds expectations, AMD's competitive advantage relative to Intel could narrow.

Key data

• 1Q26 revenue$13.58BAbove JPMorgan's estimate of $12.23B and the Street's approximately $12.36B.
• 1Q26 non-GAAP EPS$0.29Well above the Street's approximately $0.01; the report notes that about $0.06 came from a one-time I&O gain, implying normalized EPS of about $0.23.
• 1Q26 gross margin41.0%Above the Street's approximately 36.5%, marking the highest level in more than 5 years.
• 2Q26 revenue guidance$14.3BMidpoint implies about +11% YoY, above the Street's approximately $13.0B.
• 2Q26 gross margin guidance39.0%Down about 200bps from 1Q, affected by the non-recurrence of inventory gains and dilution from the early-stage 18A ramp.
• DCAI 1Q26 revenue$5.05BAbout +7% QoQ and about +22% YoY, with operating margin of about 30.5%.
• CCG 1Q26 revenue$7.73BAbout -6% QoQ, better than the prior expectation of -12% to -14%, but mainly supported by OEM/ODM pull-ins and low channel inventory.
• Intel Foundry 1Q26 revenue$5.42BAbout +20% QoQ, but operating loss was still about $2.4B.
• CY26 revenue/EPS forecast$59B / $1.14Raised from the prior $54.8B / $0.61.
• Cash and equivalents$32.8BAs of the end of 1Q26; 1Q26 operating cash flow was about $1.1B and capex was about $5B.

Impact & implications

The implication of the report is that Intel's near-term fundamental improvement has already been reflected in higher earnings forecasts and a higher target price, but the current share price still looks elevated relative to that target. Investors need to distinguish between the earnings elasticity driven by short-term supply catch-up and inventory restocking, and the differences versus mid-term competitive positioning, Foundry commercialization, and structural gross margin recovery.

Risks

• Intel's technology and product roadmap execution could be better than expected, potentially allowing it to achieve technology parity or leadership sooner.
• The downcycle in PC and data center server CPUs could prove shorter than expected, potentially leading to a faster demand recovery.
• Intel Foundry Services customer adoption could exceed expectations, potentially accelerating revenue scale-up.
• If improvements in 18A yields and pricing fail to offset rising 2H costs such as memory, substrates, and t-glass, gross margin recovery could come in below expectations.
• AMD, NVDA Vera, Google Axion, AWS Graviton, and other ARM-based hyperscaler silicon could continue to pressure Intel's server CPU share.

What to watch

• DCAI revenue growth and server CPU share trends in upcoming quarters.
• Whether PC end-demand can support revenue after CCG inventory restocking ends.
• Whether 2H26 gross margin can recover from around 39.0% to above 41%.
• Progress in 18A and 14A yields, and the degree of gross margin dilution from 18A volume ramp.
• Whether the timeline for Foundry external customer orders, advanced packaging revenue opportunities, and break-even shifts later.
• Whether the ASIC business can grow from an annualized scale of about $1.5B into a meaningful source of EPS contribution.