Intel Corp (INTC.O): Transformation in Progress; Maintain Buy

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Intel Corp (INTC.O): Transformation in Progress; Maintain Buy

Intel Corp (INTC.O)

24 July 2026 Citi Research

2Q26 Earnings Review

Industry PC Units down LDD% in 2026. Management expects PC consumption to

remain below seasonal levels in 2H26, driven primarily by memory supply

constraints, resulting in low double-digit YoY declines in PC unit shipments.

Despite this, Intel’s PC business is benefiting from better mix and pricing.

ASIC momentum. Intel is leveraging its CPU, XPU, advanced packaging, and

process technologies to address the ~$100B ASIC market. The business is

approaching a $2B annualized run-rate (up 3x YoY and from ~$1.0B last quarter),

with customers including Google IPU and Fortinet security processors.

Management sees a path to a $4B run-rate in the future.

Memory Innovation. Intel has hired a former memory company CEO. Memory is a

supply constraint challenge, and the company aims to integrate compute and

memory in order to improve memory usage efficiency.

Raised 2026 capex to >$20B; 2027 capex will be significantly higher YoY. Capex

spending remains broad-based, including investments in advanced packaging

such as EMIB-T, although it is weighted toward front-end manufacturing (Intel 10,

Intel 7, Intel 3). Increased investment reflects confidence in customer demand

across business units. Intel will increase tooling spending in 2026 by 40% YoY.

2027 capex is allocated across Intel's US manufacturing network, towards more

advanced nodes (Intel 4, Intel 3, Intel 18A and 14A).

Gross Margins. New markets create challenge for gross margin expansion. ASIC

gross margins could impact corporate margins 2026/2027, Advanced packaging in

late 2027/ 2028, and external wafers in late 2028 /2029. That said, the core TAM of