Intel Corporation INTC has garnered significant customer interest in the just concluded Mobile World Congress (MWC) event held in Barcelona, Spain, for its recently launched Xeon 6 processors with Performance-cores (P-Cores). This system-on-chip (SoC) has been designed to cater to the huge demand for high AI (artificial intelligence) workloads across diverse sectors. With industry-leading performance across data center workloads and up to two times higher performance in AI processing, the Xeon 6 family delivers the industry’s best central processing unit (CPU) for AI at a lower total cost of ownership (TCO).

Ergonomics of INTC’s Xeon 6 Processors

Based on the x86 computer architecture, the new Intel Xeon 6700/6500 series processors are designed with high core counts and built-in acceleration for multiple segments. The processors deliver an average of 1.4x better performance than the previous generations available in the market. In addition, with a 5:1 consolidation of a 5-year-old server on average, the Xeon 6 processors enable significant performance-per-watt efficiency, resulting in up to 68% savings in TCO. Consequently, the new breed of Xeon 6 processors offers the perfect balance between performance and energy efficiency.

The Intel Xeon 6 processor for network and edge platforms leverages Intel’s built-in accelerators for virtualized radio access networks (vRAN), media, AI and network security to address the growing demand for network and edge solutions in an AI-driven world. It delivers up to 2.4x the RAN capacity and a 70% improvement in performance-per-watt compared to previous generations thanks to Intel vRAN Boost.

INTC Focusing on AI Chips, 5N4Y 

Intel remains on track with its 5N4Y (five nodes in four years) program to regain transistor performance and power performance leadership by 2025. Intel Xeon 6 processor with Efficient-cores (E-cores), code-named Sierra Forest, marks the company’s first Intel 3 server product architected for high-density, scale-out workloads. 

Intel Xeon platforms have reportedly set the benchmark in 5G cloud-native core with substantial performance and power-efficiency improvements, additional power-saving capabilities and easy-to-deploy software. This has triggered healthy demand trends from major telecom equipment manufacturers and independent software vendors to optimize and unleash proven power savings for a more sustainable future.

Intel has witnessed healthy traction in AI PCs that has taken the market by storm and remains firmly on track to ship more than 100 million by the end of 2025. Panther Lake – the chip based on Intel 18A and the architectural successor to the well-received Lunar Lake – is slated to be launched in the second half of 2025, while Clearwater Forest – the first Intel 18A server product – is likely to be unveiled in the first half of 2026. 

The company has introduced the Intel Core Ultra, which features a neural processing unit that enables power-efficient AI acceleration with 2.5x better power efficiency than the previous generation. With superior graphics processing units (GPU) and CPU capabilities, it can speed up AI solutions. The company also launched the new vPro platform with Intel Core Ultra processor that delivers enhanced power efficiency. With dedicated AI acceleration capability spread across the central processing unit, graphics processing unit and the new neural processing unit, it will unlock an endless new wave of AI experiences across all apps. With such innovative products, the company is gradually witnessing an uptrend in revenues over the past few quarters, although it appears to be significantly down from the year-ago tally. 

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Price Performance

Intel has plunged 52.9% in the past year against the industry’s growth of 24.5%, lagging its peers Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA. Much of this underperformance was due to severe financial difficulties and operational challenges, which forced management to undertake a comprehensive review of its businesses while implementing corporate restructuring in the top rungs. 

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Estimate Revision Trend of INTC

Earnings estimates for Intel for 2024 have moved down 106.5% to a loss of 9 cents over the past year, while the same for 2025 has declined 55.6% to 92 cents. The negative estimate revision depicts bearish sentiments for the stock.

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Too Little, Too Late for INTC?

The recent product launches appear “too little too late” for Intel. Although Intel has scaled its AI footprint, it seems to lag NVIDIA on the innovation front, with the latter’s H100 and Blackwell GPUs being runaway successes. Leading technology companies are reportedly piling up NVIDIA’s GPUs to build clusters of computers for their AI work, leading to exponential revenue growth. 

An accelerated ramp-up of AI PCs further affected the short-term margins of Intel as it shifted production to its high-volume facility in Ireland, where wafer costs are typically higher. Margins were also adversely impacted by higher charges related to non-core businesses, charges associated with unused capacity and an unfavorable product mix.

US-China Trade Tariffs Hurt INTC

China accounted for more than 29% of Intel's total revenues in 2024, making it the single largest market for the company. However, the communist nation's purported move to replace U.S.-made chips with domestic alternatives significantly affected INTC’s revenue prospects. The directive to phase out foreign chips from key telecom networks by 2027 underscores Beijing's accelerating efforts to reduce reliance on Western technology amid escalating U.S.-China tensions.

President Trump has imposed a 10% levy on imports from China, which doubled the 10% duty slapped on Beijing in early February. As Washington tightens restrictions on high-tech exports to China, Beijing has intensified its push for self-sufficiency in critical industries. This shift poses a dual challenge for Intel, as it faces potential market restrictions and increased competition from domestic chipmakers. Moreover, weaker spending across consumer and enterprise markets, especially in China, resulted in elevated customer inventory levels, resulting in soft demand trends. Strict export control measures are further likely to affect the market dynamics, leading to below-par revenue growth in the near term.

End Note

Intel has been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.

The road ahead for Intel is bumpy and strewn with daunting challenges, and how it navigates these roadblocks in the coming days remains to be seen. Intel carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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