Intel Corp (NASDAQ:INTC, XETRA:INL) is expected to report its latest quarterly results after the market close Thursday, with Wedbush forecasting that the chipmaker could exceed consensus expectations as improving server demand, higher pricing and better-than-anticipated margin trends support results.
Wedbush wrote that Intel's guidance points to more than 5% quarter-over-quarter sales growth, in line with current analyst expectations for the third quarter. The firm expects data center revenue to be a key contributor, modeling approximately 10% sequential growth and 40% year-over-year growth, driven in part by stronger server demand.
The firm highlighted that recent average selling price increases across Intel's server products could account for a significant portion of expected revenue growth. With additional pricing actions reportedly underway and incremental production capacity becoming available as Intel ramps PC CPU output on its 18A process node, Wedbush expects server revenue could outperform its estimates.
Wedbush also pointed to improving pricing trends in Intel's PC CPU business. While Intel's outlook initially appeared aggressive amid weaker PC demand tied to higher costs, the firm noted that PC CPU prices have increased at a similar pace to server products, supporting expectations for modest sequential revenue growth in the segment.
On profitability, Wedbush expects Intel's gross margins to come in ahead of previous expectations. The company had guided to lower gross margins in the quarter due to the loss of a one-time benefit from selling previously scrapped products and costs associated with the 18A manufacturing ramp. However, Wedbush highlighted improving product pricing and faster-than-expected yield improvements across both 18A and older manufacturing processes as potential margin tailwinds.
Despite expecting a strong earnings report, Wedbush noted that the market's reaction may depend more on broader investor sentiment than Intel's financial performance. The firm pointed to recent semiconductor sector volatility, where strong results from other chip companies have not always translated into stock gains amid concerns around China's artificial intelligence progress, macroeconomic uncertainty and questions around data center spending.
Wedbush wrote that Intel may be better positioned than some peers to benefit from continued demand for compute infrastructure, including from inference workloads, but added that the company's valuation could make it more vulnerable to broader market movements.
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