Intel is set to report its second-quarter earnings on Thursday, and analysts at RBC Capital Markets believe the company could surprise to the upside — not necessarily on massive sales growth, but on the strength of its server chip business. The investment bank expects Intel to post $14.3 billion in revenue, with room for roughly a 5% beat if pricing for server central processing units (CPUs) holds up.
What RBC Is Watching
RBC’s base case calls for $14.3 billion in revenue and adjusted earnings per share of $0.20. But the bank sees potential for a modest beat, driven by better-than-expected pricing in Intel’s server CPU segment. Server CPUs are the chips that power data centers and cloud computing infrastructure — a market where Intel has long been dominant but has faced increasing competition from AMD and custom chip designs from cloud giants like Amazon and Google.
According to RBC, Intel’s server CPU business is showing signs of strength: double-digit volume growth this year, supported by a better product mix and firmer pricing. That could translate into slightly higher gross margins than the company has guided for, which would be a welcome sign for investors who have watched Intel’s margins shrink amid a multiyear turnaround effort.
The broader backdrop for Intel is mixed. The company is in the middle of a costly restructuring under CEO Pat Gelsinger, aimed at regaining manufacturing leadership and expanding its foundry business. That has weighed on profits in recent quarters. But a strong server CPU cycle could provide a near-term cushion, especially as enterprises and cloud providers upgrade their data center infrastructure.
What a Beat Would Mean for Investors
If Intel delivers a revenue beat, it would likely be taken as a positive signal that its core data center business is stabilizing. That matters because Intel’s stock has been under pressure as investors question whether the company can execute on its turnaround while fending off rivals. A better-than-expected Q2 could ease some of those concerns, at least temporarily.
However, investors should keep in mind that a 5% revenue beat on $14.3 billion would still leave Intel’s top line well below the levels it reported a few years ago. The company’s revenue peaked at over $79 billion in 2021 and has since declined sharply as PC demand softened and market share shifted. So while a beat is encouraging, it doesn’t signal a full recovery.
Gross margins are another key metric to watch. Intel has guided for margins in the mid-30% range for 2024, down from over 50% in 2021. If server CPU pricing helps push margins slightly higher, that could improve the company’s profitability outlook. But any improvement is likely to be incremental, not transformative.
RBC’s view aligns with a broader theme in tech: the AI boom is driving demand for powerful chips in data centers, and Intel is trying to position itself to capture some of that spending. While Nvidia has dominated the AI chip market, Intel’s server CPUs remain essential for general-purpose computing workloads. The question is whether that demand is enough to offset ongoing headwinds in the PC market and the cost of Intel’s manufacturing investments.
What to Watch in the Report
Beyond the headline numbers, investors will want to hear Intel’s outlook for the second half of the year. The company’s guidance will be a key signal of whether the server CPU strength is sustainable. RBC’s analysis suggests that pricing power in the server segment could persist, but that depends on demand from cloud providers and enterprise customers.
Intel’s foundry business, which manufactures chips for other companies, is also a long-term focus. The company has announced deals with several customers, but revenue from that segment is still small. Any update on foundry progress could move the stock.
For everyday investors, Intel’s Q2 report is a reminder that even in a turnaround story, pockets of strength can emerge. Server CPU pricing is one such bright spot. But the broader picture remains one of a company in transition, and one quarter of better-than-expected results doesn’t change that. As always, it’s worth looking beyond the headline beat or miss to understand the underlying trends.
Intel shares have rallied in recent weeks alongside a broader tech rebound, as tech stocks rallied ahead of earnings season. The outcome of Thursday’s report could determine whether that momentum continues.
