Intel Corporation (NASDAQ:INTC) shares continued their upward trajectory in premarket trading on Monday, adding 1.2% to reach $102.83 by 5:58 a.m. EDT. The gain extends a robust weekly performance that saw the stock surge 12.7%, far outpacing the Nasdaq Composite's 5.2% advance during the same period. The rally comes as investors weigh the company's foundry ambitions against the reality that external customers remain a small fraction of the business.
According to Intel's latest filing, external clients contributed just $293 million in foundry revenue during the second quarter, representing a mere 5.1% of the segment's total revenue of $5.765 billion. The foundry unit reported an operating loss of $2.089 billion for the quarter, though this marked a narrowing from the $3.168 billion loss in the year-ago period. Intersegment revenue, which comes from Intel's own product groups, accounted for the remaining 95% of foundry sales.
The company has made no secret of its ambition to become a major player in the contract chip manufacturing space, competing directly with Taiwan Semiconductor Manufacturing Company (NYSE:TSM). However, the data underscores the challenge ahead. Much of the recent growth in external foundry revenue stems from Altera's reclassification as an external customer following its deconsolidation, rather than new third-party wins.
To bolster its customer-facing efforts, Intel announced on Friday the appointment of Dean Jarnac as executive vice president and chief sales officer, effective September. Jarnac joins from Marvell Technology (NASDAQ:MRVL), where he held senior sales roles, and brings experience from Broadcom (NASDAQ:AVGO) and Advanced Micro Devices (NASDAQ:AMD). CEO Lip-Bu Tan emphasized that "customer focus and execution are central to Intel's strategy and future success."
The timing of the appointment is critical. With capital expenditures for 2026 raised to $20 billion from $18 billion, Intel needs a broader customer base to spread the high fixed costs of its fabrication plants. Increased output for advanced nodes like Intel 18A, Intel 3, and Intel 4 has driven internal demand, but external orders are essential for long-term profitability.
The stock's recent rally was supported by broader market conditions. Softer U.S. jobs data reduced the likelihood of a September rate hike, fueling a rally in semiconductor stocks. The Nasdaq posted its largest weekly percentage gain since April. However, Intel's trading volume on Friday was just 61% of the 65-day average, suggesting the move may lack conviction.
Fundamentally, Intel's operational performance has improved. Second-quarter revenue rose 25% year-over-year to $16.1 billion, with data center and AI sales jumping 59% to $6.3 billion. GAAP gross margin expanded by 12.9 percentage points to 40.4%, and the company returned to non-GAAP profitability with diluted EPS of $0.42, compared to a loss of $0.10 in the prior-year period.
Looking ahead, Intel guided third-quarter revenue in the range of $15.8 billion to $16.8 billion, with non-GAAP earnings of $0.38 per share. Wall Street remains cautiously optimistic, with a median price target of $118.50, implying a 16.6% upside from Friday's close. However, the most common rating is Hold, reflecting skepticism about the foundry's external traction.
This week, investors will scrutinize inflation data, including the July consumer price index on August 12 and producer price index on August 13. A hotter-than-expected reading could derail the recent rally. Additionally, Applied Materials (NASDAQ:AMAT) is scheduled to report earnings, offering insights into chip-equipment demand and capital spending trends.
Ultimately, Intel's future success hinges on converting interest into actual wafer orders from external customers. Until that happens, the foundry narrative remains a promise rather than a proven reality.
