Is Intel Still Investable At $60?

INTC Primer: No Equity Dilution Necessary (Part 1)

When I first wrote about INTC (link above), the stock was trading at around $20. At the time, Intel could do no right — Pat Gelsinger was fired, Foundry was eating up precious cash flow, the dividend was cut — it was a perfect storm of unfortunate events.

Fast forward to 2026, and the tide finally seems to be turning for INTC. Lip-Bu Tan became the new CEO, Nvidia made an investment in Foundry, Tesla announced a partnership, and even Google and Apple have been rumored to be swinging by IFS.

By now, most of us can agree that Intel was a bargain at $20. But is INTC still investable at $60? This Reddit post claims that a reverse DCF reveals that Intel would need 10 straight years of 16% EBITDA growth in order to justify its current valuation, which is ambitious by any stretch of the imagination. So let’s find out by doing a deep-dive into the numbers, shall we?

Performance

As we can see above, INTC’s troubles seem to have begun in 2022, when its revenues took a downturn from $79B in FY21 to $63B in FY22 (blue bars) — and where it subsequently fell to around $50B+ in the following years.

The presence of operating leverage in Intel’s business model is starkly apparent in how quickly their Operating Profits (orange bars) fell together with Revenues in FY22 and FY23 — this was even before Foundry (grey bars) really started to eat into their profits in FY24, as we can see above. Veterans of the semiconductor industry will recognize that semiconductor foundries rely on economies of scale to achieve profitability for many reasons, so this set of statistics shouldn’t be a surprise.

Intel stopped reporting Platform Revenue in FY24

A quick check in their segment reporting reveals that most of the aforementioned revenue drop occurred in the Notebook & Datacenter (DCG) platforms (blue & yellow bars). The timing of this decline coincided with when Apple released its first M-chip laptops and when Nvdia started taking share of the GPU/AI chip market.

Intel’s fortunes really started nosediving in FY24, when Foundry started to report Operating Losses. We can see how Foundry segment losses (grey bars in first chart) ate up all of Group operating profits (orange bars) in FY24, and represented nearly all operating losses during FY25. Thus, it’s no surprise that investors have historically been quite bearish about the contribution of Foundry to the Group.

Corporate Unallocated Expenses not reported prior to FY22

The good news is that Intel Products operating profit (i.e. ex-Foundry) has since stabilized (blue bars), despite segment revenues not recovering. This is largely due to successful efforts to recover margins at the CCG1 segment, which has recovered from a low of 20% Operating Margin in FY22 back to historical levels of 35% and 29% in FY24 and FY25 respectively. DCAI Operating Margins have also recovered somewhat, albeit to only half of historical levels. This is once again a function of economies of scale, as Intel has reported improved sales of Meteor/Lunar/Arrow Lake CPU chips, and is fighting back in the GPU space somewhat successfully with the affordable Intel Arc Pro B50/70.

We can also see how Intel has successfully divested of its Others segments (grey bars) since FY24, which used to include Altera and Mobileye. These segments have been historically loss-making, so getting rid of them to concentrate on Intel Products has been a wise move for Group profitability.

Unallocated Corporate Expenses (yellow bars) ballooned in FY24 due to one-time Asset Impairment and Employee Severance charges, which was attributable to the massive layoffs that was announced previously. Fortunately, it seems to have settled back to historical levels in FY25, and should continue doing so going forward.

Valuation

Subsequently, let us make a reasonable assumption that Intel Products will be able to sustain its current level of segment Revenues & Operating Profits. I don’t think that’s too unreasonable as Intel Products does seem to be having some success in this space.

Thus, we shall assume that the sum of Intel Products (blue bars) and Unallocated Corporate Expenses (yellow bars) will normalize at about $10B of Operating Profits annually (i.e. Intel ex-Foundry OP). This brings the question of profitability back to Foundry — can Foundry become profitable enough to justify the current $60 share price?

At the current market price, INTC has a market cap of about $315B. So how much does Foundry have to earn before we can say that Intel is trading at fair value?

This is where a sensitivity analysis of Foundry’s segment earnings can be helpful. Recall that we are assuming that Intel ex-Foundry earns $10B in Operating Profits (blue bars below). Thus, Foundry has to earn Operating Profits on top of that in order to justify the current valuation.

Let’s assume under the most conservative valuation that Foundry (orange bars) only ever earns $5B annually into perpetuity. That would bring total Operating Profits to $15B — which after taxes should yield Net Profits of about $12.5B. If so, the PE ratio would be about 25x. Not bad for the most conservative valuation, especially given how there are already many ex-growth companies trading at 25x PE.

What if Foundry earns $10B? That would yield Operating Profits of $20B, or Net Profits of about $17B. Under this base-case scenario, the PE ratio would be just 18.5x.

And if Foundry earns $20B? That would yield Operating Profits of $30B, which would amount to at least $25B in Net Profits. This blue-sky scenario would result in a PE ratio of just 12.6x!

Conclusion

This is just a quick illustration that shows how Intel’s valuation could look like under different Foundry Operating Profit scenarios. Of course, you’d have to believe that Foundry can eventually be profitable (“in the black”) to subscribe to this scenario analysis. But as long as that assumption holds, it’s quite easy to see how Intel could justify even its current market cap!

As I’ve mentioned before, TSMC earns roughly 1:1 ratio of CAPEX-to-Net Profits. If Intel could achieve even half of what TSMC already does (i.e. 2:1 ratio of CAPEX-to-Net Profits), it could add $5B in Net Profit simply by investing $10B in CAPEX — something it already does today!

For added context, TSMC reported an FY25 Net Profit of $50B. Could Intel Foundry do just 1/10th of that volume, at half the performance? I certainly think that’s not out of the realm of imagination. Just imagine, IFS would only need to eventually operate at 1/10th the efficiency of TSMC in order to justify a 25x normalized PE ratio today. That sounds more like a valuation floor than a ceiling!

Of course, all this assumes that Intel has managed to gain the trust of customers and that there is enough demand for Foundry services. Well if the headlines are any clue, it certainly looks like things are going that way. At the very least, we can say that asymmetric upside exists in INTC even at $60.