They beat gross margins by 300bps selling 2022 chips, then guided margins down because the new stuff is too expensive to make.
Thesis: Intel is currently a profitable legacy foundry sweating depreciated assets (Raptor Lake) to subsidize a cash-burning startup (18A). The Q1 beat was low-quality, driven by 'Intel 7' constraints and tariff pull-ins. The Q2 guide exposes the structural rot: outsourcing 'AI PC' chips (Lunar Lake) to TSMC compresses margins to 36.5%. You are funding a 2026 turnaround promise with negative free cash flow today.
Verdict: AVOID — Conviction: MEDIUM
Catalyst: Panther Lake launch on 18A (Year-end 2025) confirming yield viability.
Key Risk: 18A yield failure forcing continued reliance on TSMC, permanently impairing gross margins.
The Tell: CFO Zinsner admitted the margin beat came from Raptor Lake (old node) while Lunar Lake (new AI product) 'makes the accounting look a little funky' and is a 'headwind to our margins.' They are profitable only where they are irrelevant.
Friction Level: MODERATE_FRICTION — Whether 2026 'margin stacking' from internalizing wafers is a viable path or a yield-dependent fantasy.
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