Intel & Fortinet: first public named client..
Intel Lands Major Foundry Customer as Growth Momentum Builds
Intel (NASDAQ: INTC) has attracted significant investor attention over the past year thanks to growing optimism surrounding its foundry business. The company recently announced that cybersecurity leader Fortinet will use Intel’s manufacturing services to develop advanced security chips. While Intel Foundry has previously worked with customers, Fortinet is the first publicly named client.
The partnership is a meaningful milestone because Fortinet is a well-established player in cybersecurity, generating nearly $7 billion in annual revenue. Securing a customer of that size suggests Intel’s foundry offerings are becoming increasingly competitive and capable of attracting recognized industry leaders.
Foundry Growth Continues Despite Losses
Winning major customers will be essential if Intel hopes to challenge industry leader Taiwan Semiconductor Manufacturing Company (TSMC), which dominates the contract chip manufacturing market. Although competing against TSMC will be difficult, attracting companies such as Fortinet indicates Intel is making progress.
In its second-quarter results for the period ending June 27, Intel reported revenue of $16.1 billion, representing a 25% increase from the previous year. The foundry division was one of the company’s strongest-performing segments, generating $5.8 billion in revenue, up 31% year over year.
However, profitability remains a challenge. The foundry business recorded a loss of $2.1 billion during the quarter. While still substantial, that result improved from the $3.2 billion loss reported in the same period a year earlier.
Is Intel Stock Still Attractive?
Although Intel’s recent performance has been encouraging, investors may need to consider whether much of the company’s progress is already reflected in its share price. Following a strong rally, Intel trades at a forward price-to-earnings ratio above 100 based on analysts’ forecasts, making the stock appear expensive by traditional valuation measures.
Investor enthusiasm has been fueled by several high-profile developments, including government support and major business wins. As a result, expectations for future growth have risen significantly.
Stock Pullback Raises Questions
Despite earlier gains, Intel shares have experienced a substantial decline since reaching a recent peak. The stock benefited from growing demand linked to advances in artificial intelligence and increasing need for powerful processors. Nevertheless, even some of the company’s strongest earnings results in years have not been enough to reverse the recent downward trend.
Given the volatility, investors may want to take a careful and measured approach when evaluating the semiconductor giant.
Leadership and Technology Improvements
A year ago, many investors believed Intel was undervalued after several years of lagging behind rivals such as Nvidia and TSMC. Since then, CEO Lip-Bu Tan has overseen progress in areas that had challenged previous management teams.
A key achievement has been advancement of Intel’s 18A manufacturing process, a next-generation chipmaking technology designed to compete with the most advanced processes offered by TSMC. Success in this area is central to Intel’s strategy of rebuilding its manufacturing leadership and expanding its foundry business.
Overall, the Fortinet agreement represents another step forward for Intel’s turnaround efforts, though the company still faces challenges in achieving sustainable profitability and justifying its premium valuation.
Project News
