Analysts see hope in Intel’s earnings but remain wary of structural issues

Intel reported stronger-than-expected results for the second quarter Thursday evening, beating on the top and bottom lines. It was a welcome glimmer of hope for analysts and investors, as the company struggled in the preceding quarters to clear inventory and retool for artificial intelligence-centric, GPU-heavy corporate spend.

Shares of Intel were up about 5% Friday morning.

Wall Street analysts largely cheered the results, driven in large part by PC sales, but cautioned that the company had larger issues that would offer significant headwinds.

“Good results,” Citi analyst Christopher Danely said in a Friday note, “but structural issues remain.” Citi reiterated a neutral rating and a $34 price target.

“We expected spending on Nvidia GPUs to come at the expense of Intel and AMD CPUs, and Intel stated the data center market will be weak for a while. In addition, Intel continues to chase growth in markets where we think it will not succeed, such as foundry and graphics,” Danely wrote.

Deutsche Bank, which described Intel’s numbers as “more than marginal,” maintained its Hold rating but increased its price target from $32 to $38, citing “abated” inventory challenges. But the company will likely face continued pressures with corporate spending shifting toward AI, Deutsche Bank analyst Ross Seymore said.

JPMorgan, meanwhile, maintained an underweight rating on the stock, the equivalent of a sell. Analysts increased Intel’s price target from $30 to $35 and lauded the company’s “better-than-expected results. But, JPMorgan noted, while continued execution improvement was a positive sign, improving production and shipments of server- and client-side products would be the next challenge.

Intel CEO Pat Gelsinger said on a call with analysts the company still sees “persistent weakness” in all segments of its business through year-end, and that server chip sales won’t recover until the fourth quarter. He also said cloud companies were focusing more on securing graphics processors for AI instead of Intel’s central processors.

— CNBC’s Kif Leswing and Michael Bloom contributed to this report.