In an October 18 report, JPMorgan upgraded Intel from Underweight to Neutral, with a December 2027 price target of $85. Based on the October 16 closing price of $89.85 listed in the report, the target price is still about 5% lower.
This gap shows that the core of this upgrade is that after the stock price decline, risk and reward have become more balanced. Intel's operational execution is improving, but there is still a considerable way to go before completing a transformation that will take years to deliver.
The decline has absorbed some risk, but valuation still requires earnings delivery
JPMorgan noted that Intel's stock price has pulled back about 36% from its June high, exceeding the roughly 20% to 25% decline among peers over the same period. Some of the factors that previously supported its cautious stance are gradually being reflected in the stock price.
Competitive pressure over the past few years has been very clear. Since JPMorgan downgraded the stock in November 2022, Intel's revenue share in the server x86 CPU market has fallen from 77% to 53%, and its PC CPU share has fallen from 81% to 68%. The bank expects that share may continue to decline in the coming quarters, especially in the server business.
However, the recent adjustment has also compressed Intel's previous valuation premium relative to peers. Based on JPMorgan's projected 2028 adjusted earnings per share of $3.60, Intel's current price-to-earnings ratio is about 25x, already close to the 24x peer valuation level used by the bank.
JPMorgan's $85 price target is derived by multiplying its projected 2028 earnings per share by a price-to-earnings multiple of approximately 24x. This means that even after a notable share price pullback, the current valuation remains anchored in expectations of continued earnings recovery.
Equity dilution has also been a significant overhang. The report notes that Intel's shares outstanding have risen from roughly 4.4 billion a year ago to about 5.1 billion. JPMorgan believes the dilution from the prior round of financing has largely been incorporated into the valuation and earnings calculation base, and the risk of further large-scale dilution is increasingly being priced in by the market.
But risks being priced in does not mean the need for financing has disappeared.
Execution Improving, Data Center Becomes Key to Profit Recovery
More important than the valuation shift is JPMorgan's growing confidence in operational execution under Lip-Bu Tan's leadership.
Within the core computing business, the Data Center and AI (DCAI) segment has become Intel's largest source of profit. According to the report, in the second quarter of 2026, the segment's operating profit reached $2.5 billion, surpassing the client business for the first time.
JPMorgan notes that supply of Granite Rapids server processors is tight, and long-term agreements with customers including Google extend demand visibility into 2027. This provides support for the company's future revenue and profit.
Changes in AI demand are also an important component of the bank's thesis. JPMorgan believes that Agentic AI workloads carry high CPU demand. Under this view, AI infrastructure investment could benefit Intel through its server processor business.
Despite recent market concerns about the sustainability of AI infrastructure spending, JPMorgan still expects that growth in Agentic AI demand and tight supply of advanced chips will drive further upward revisions to Intel's earnings forecasts in the upcoming earnings season and into 2027. The bank's 2028 EPS forecast is approximately 15% above consensus.
The client business presents a different set of crosscurrents. The report states that AI PCs already account for about two-thirds of Intel's client product mix, with favorable average selling prices and product mix supporting business performance. However, rising memory prices are pushing up total system bill-of-materials costs, which could weigh on PC shipments in the second half of 2026 through 2027.
Therefore, whether product mix improvement can offset end-demand pressure remains an important watch point for the client business.
Manufacturing Progress Boosts Confidence, But Foundry Still Lacks Scale Validation
The manufacturing business is one of the areas where JPMorgan's assessment has improved most noticeably.
The report states that 18A-P has entered risk production, with 14A planned for mass production in 2028 and a risk production target in the second half of 2027. JPMorgan also noted significant improvements in yield, process and design rule compatibility, and advanced packaging capabilities.
Among these, the EMIB-T advanced packaging backlog is building a foundation for the 2027 capacity ramp. For JPMorgan, these changes reinforce its confidence that Intel's manufacturing technology base is stabilizing.
However, technological progress is still a clear distance away from generating scaled external revenue.
According to the report, Intel's external foundry business on an annualized basis was only close to $1 billion in the first half of 2026. JPMorgan juxtaposed this with TSMC's approximately $150 billion in annualized total revenue over the same period to illustrate the scale gap between the two. While the business definitions are not entirely consistent, Intel's still-small external foundry revenue scale remains an important reason for the firm's cautious stance.
The key going forward is whether Intel can secure major external customers on advanced process nodes and convert technological progress into sustained orders. JPMorgan believes that the landing of named anchor customers would help validate the economic returns of the foundry business and the return prospects of continued capital investment.
The custom chip business offers another growth path. The report states that Intel's ASIC services business is approaching $2 billion in annualized revenue, roughly three times the year-ago level, and is expected to move further toward $4 billion.
ASIC stands for Application-Specific Integrated Circuit, which can be designed for specific tasks. As major cloud providers increase investment in custom chips, JPMorgan believes Intel can leverage its own chip intellectual property, system-on-chip design capabilities, and manufacturing capabilities to capture more business opportunities.
However, the revenue outlook still requires design wins and customer projects to materialize gradually. The firm lists new large cloud provider or AI lab customers as important upside catalysts going forward.
After Profit Recovery, Cash Flow Remains a Hurdle
JPMorgan's financial projections present a path of sustained earnings growth: Intel's revenue is expected to rise from approximately $63.3 billion in 2026 to $77.7 billion in 2027, and reach $94.3 billion in 2028; adjusted earnings per share are projected at $1.58, $2.44, and $3.60, respectively.
However, there remains a time lag between profit recovery and positive cash flow.
According to the report's projections, Intel's operating cash flow in 2026 will be approximately $19 billion, with capital expenditures of about $19.2 billion, leaving free cash flow slightly negative. By 2027, operating cash flow is expected to rise to approximately $22.5 billion, but capital expenditures will further increase to $26 billion, widening the free cash flow gap to approximately $3.5 billion.
It is not until 2028 that JPMorgan expects the company's free cash flow to turn positive, reaching approximately $8.2 billion.
This explains why operational improvements are not yet sufficient to prompt the bank to assign a more positive rating. Manufacturing capacity building continues to consume cash, and the report cites management as saying that free cash flow in 2027 remains "more challenging" and that the company may need to return to capital markets for financing again.
If additional financing involves equity issuance, existing shareholders could still face further dilution.
JPMorgan is also awaiting several key validations: whether the data center CPU roadmap can continue to deliver, whether the company can stabilize market share amid competition from AMD, whether AI chips and inference products can secure more orders, and whether external foundry customers can generate substantive revenue. Strengthening data center networking capabilities is also an area of focus for the bank.
Intel has provided more evidence of execution improvement, and the stock pullback has also reduced some of the prior valuation pressure. But moving from neutral to more optimistic still requires customers, market share, and cash flow to collectively demonstrate that this multi-year transformation is generating sustainable returns.
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