Intel Costs 62 Times Next Year’s Earnings. It Lost $11 Billion Over the Past Year.

Intel (INTC +0.97%) carries one of the stranger price tags in the market right now. The chipmaker’s net loss over the past year comes to about $11.3 billion. Its stock, meanwhile, trades at about $105 as of this writing, up more than 350% from its 52-week low of $22.78. And it costs about 62 times what the company is expected to earn on an adjusted basis over the year ahead.

A company losing billions doesn’t usually command a $550 billion market value and a premium growth multiple at the same time. The market has decided Intel’s losses aren’t what they appear, and on that point, I think the market is right.

Whether the stock is worth that price is a different matter.

Charges, not cash

The second quarter shows what the red ink is made of. Intel reported an $11.0 billion net loss for a quarter in which revenue climbed 25% from a year earlier to $16.1 billion.

Nearly all of the loss traces to a $12.5 billion non-cash, mark-to-market charge on shares Intel holds in escrow for the U.S. government under its CHIPS Act agreement. The first quarter followed the same pattern, with a $3.7 billion net loss that included a $3.9 billion goodwill impairment and another $1.1 billion escrow charge.

Set those items aside, and Intel is already profitable. Non-GAAP (adjusted) net income was $1.5 billion in the first quarter and $2.2 billion in the second.

Gross margin is climbing, too: 39.4% in the first quarter, 40.4% in the second, and management guided to 41% for the third — a steady expansion. And revenue growth accelerated, from 7% year over year in the first quarter to 25% in the second. Management’s own forecast even calls for positive earnings of $0.31 per share in the third quarter on a GAAP basis.

In other words, the swing from red ink to black is already underway.

What is 62 times buying?

The loss, then, is mostly an accounting story. The stock’s valuation is harder to explain away.

At about $105 a share, Intel trades at roughly 62 times its projected adjusted earnings for the year ahead — projections that work out to only about $1.70 per share from a company valued at $550 billion. And management’s own third-quarter guidance implies something similar. Annualize its guided $0.38 of adjusted earnings per share, and shares trade at roughly 70 times the company’s current earnings pace.

Demand isn’t the concern. CEO Lip-Bu Tan said in the company’s second-quarter earnings release that “AI is driving unprecedented demand for compute,” and the numbers back him up. Revenue in Intel’s data center and artificial intelligence (AI) segment rose 59% year over year to $6.3 billion last quarter.

Growth like that could well continue. After all, management says supply, not demand, is what limits the business right now.

But growth that has already shown up doesn’t get a stock to 62 times earnings on its own. The rest of the price rests on something that hasn’t happened yet.

Today’s Change

(0.97%) $0.99

Current Price

$103.49

Key Data Points

Market Cap

$517BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$101.80 – $105.97

52wk Range

$22.77 – $142.35

Volume

88.5M

Avg Vol

122.3M

Gross Margin

39.05%

The $8 billion swing

That something is the foundry. Intel’s products businesses already earn plenty. The client computing and physical AI group posted $2.3 billion of operating profit last quarter, and the data center and AI group earned $2.5 billion. Intel Foundry, the chip-manufacturing arm, gave $2.1 billion of that back — a loss pace of more than $8 billion a year.

Chief Financial Officer Dave Zinsner said last year that the foundry was on track to break even sometime in 2027, and the losses are narrowing, down from $2.4 billion a quarter earlier. Ending them would roughly double the company’s current adjusted earnings pace all by itself. Much of that swing, I’d argue, is already baked into the stock’s price.

However, the foundry is still overwhelmingly Intel’s own customer. External customers supplied $293 million of the unit’s $5.8 billion in second-quarter revenue. Intel 14A, the manufacturing process meant to win outside chip designers at scale, isn’t scheduled for high-volume production until 2028, so meaningful outside revenue may be a couple of years away.

And the spending comes first. Intel raised its 2026 capital spending outlook to more than $20 billion, expects significantly higher spending in 2027, and sold $20 billion of new stock at $95 a share this month for general corporate purposes.

The turnaround looks impressive. Revenue is accelerating, margins are expanding, and the adjusted bottom line has been positive for two quarters running.

My problem is the price. A 62-times-forward multiple leaves the stock priced for a foundry payoff that still depends on customers who mostly haven’t signed yet. Even a company executing this well can be an expensive stock, and I think Intel is one right now.