Where could third-quarter results diverge from expectations?

  • Ahead of the results announcement on 29 October, HSBC forecasts Intel’s third-quarter 2026 revenue at 17 billion dollars, above the company’s guidance range of 15.8 billion to 16.8 billion dollars and the Visible Alpha consensus of 16.4 billion dollars.
  • HSBC forecasts fourth-quarter revenue of 18.3 billion dollars, up 7% quarter over quarter; consensus is 16.9 billion dollars, up 3%. The bank still expects the company to beat expectations and raise guidance, though by less than in the previous two quarters.

How does server growth offset client weakness?

  • Intel is reallocating capacity toward server CPUs. HSBC therefore expects client revenue to weaken in the second half of 2026, but growth in the data center and AI business (DCAI) to be sufficient to offset that drag.
  • HSBC’s third- and fourth-quarter client revenue forecasts are approximately 10% and 14% below consensus, respectively; even so, its total revenue forecasts are approximately 4% and 8% above consensus, respectively.
  • Since second-quarter results were announced, consensus for 2027 DCAI revenue has risen 18%. HSBC still believes growth potential is underestimated: its forecast of 36.7 billion dollars is 9% above the consensus of 33.6 billion dollars.

What constrains server CPU expansion?

  • HSBC believes AI-driven demand for server CPUs significantly exceeds supply, and that ABF substrates constrain Intel’s server CPU production more than wafer supply. As of the report’s publication, the company had prepaid suppliers 934 million dollars during the year to secure substrate and other component capacity.
  • The bank is positive on server CPU shipments in 2026–2027, citing the shift of Intel 3 and Intel 7 capacity toward servers, progress in 18A yields and advance substrate purchases. HSBC expects server CPU shipments to rise 21% year over year in 2027 and average selling prices to increase 10%; earnings forecasts would face pressure if shipment growth or price increases fall short of expectations.

Why focus first on advanced packaging for the foundry business?

  • HSBC believes EMIB-T advanced packaging could generate external foundry revenue before front-end wafer manufacturing. The bank expects more customers to be in discussions about EMIB-T capacity for 2027–2028; recent accounts of discussions involving Nvidia gaming GPUs, Broadcom network switch chips and AMD compute chiplets remain reported information.
  • Progress is not uniformly positive: HSBC notes that the production ramp of Google TPU v9 at MediaTek could be delayed until the end of 2027 or even 2028, and Intel is still addressing yield challenges associated with large EMIB-T photomasks. The company previously confirmed plans to deliver version 0.9 of its process design kit to external foundry customers in the second half of 2026; HSBC sees related progress on the earnings call as a potential catalyst.

What assumptions underpin the 200-dollar price target?

  • HSBC maintains its buy rating and 200-dollar price target, implying approximately 121% upside from the 26 October 2026 closing price of 90.47 dollars. The target uses a sum-of-the-parts valuation: the core business is valued at approximately 125 dollars per share, or 30 times forecast 2027 earnings; the foundry business is valued at approximately 75 dollars per share, or 3.1 times forecast 2027 book value.
  • HSBC forecasts a company-wide adjusted operating margin of 18.9% in 2027, supported by the core business, and a negative 10.6% adjusted operating margin for the foundry business. The bank compares the foundry business with second-tier foundries and awaits customer confirmations and margin improvement; greater margin dilution from foundry capacity expansion would also affect its valuation assessment.