Intel (NASDAQ:INTC) is set to release its second-quarter results after the market close on Thursday, with investor attention pivoting from top-line revenue to the mounting losses in its foundry business. The early consensus from Visible Alpha points to revenue of $14.4 billion, marginally above the company's midpoint guidance of $14.3 billion. However, simply beating sales expectations may not be enough to satisfy the market, as deeper structural challenges take center stage.
Foundry Losses Overshadow Sales Performance
In the first quarter, Intel Foundry generated only $174 million in external revenue, while reporting an operating loss of $2.44 billion. That loss is 14 times larger than the external revenue, highlighting the heavy costs of building out the company's manufacturing capabilities. The foundry segment's total revenue stood at $5.42 billion, with the vast majority still coming from Intel's own product divisions. External revenue grew by $143 million year-over-year, but Intel noted that much of this was driven by Altera's transition to an external customer, making the underlying trend less robust.
Stock and Sector Performance
Intel shares fell 13.5% over the past week, closing Friday at $95.04, as the broader semiconductor index dropped about 10%. Despite the pullback, Intel remains up more than 160% year-to-date in 2026, while the PHLX Semiconductor Index has gained over 60%. The high expectations leave little room for error.
Key Financial Metrics Under the Microscope
Investors will focus on four critical figures in Thursday's report: foundry losses, external sales, gross margin, and capital expenditure. Intel has guided for an adjusted gross margin of 39% and adjusted earnings of $0.20 per share. The product segment remains a bright spot, with Data Center and AI revenue climbing 22% to $5.1 billion, while Client Computing grew 1%.
Cash flow adds another layer of concern. First-quarter operating cash flow was $1.1 billion, while gross capital expenditures totaled $5.0 billion, resulting in adjusted free cash flow of negative $2.0 billion. Last week, Intel announced a €5 billion ($5.7 billion) investment in Ireland, representing roughly 30% of its expected 2026 capital spending, with completion targeted by end of 2027.
Market Sentiment and Risks
Kathleen Brooks of XTB noted that investors may "get more impatient" if AI-related spending continues to escalate without clear returns. Intel's foundry executive Naga Chandrasekaran reported a "significant increase" in demand for Intel 3 wafers, driven by servers and AI applications, but the investment raises the bar for profitability.
Risks remain elevated. Strong server demand or a surge in foundry bookings could spark a recovery, but poor yields, higher depreciation, or falling chip prices could amplify losses. The market is watching closely as Intel navigates its transformation.
