I know it's a little early to be posting about Q3 but I've had some time to spare and seeing as the market is fairly awful right now I thought some of my findings could cheer people up. Buckle up because this is going to be both long and technical...

Last earnings season I posted my estimate for Q2 and ended up being pretty close to the mark. I jokingly attributed this to LBT reliably sandbagging his top line guidance by $1.5B each quarter however I actually came up with the figure by looking through Intels balance sheets.

Lucky for us Intel provides an extremely rich set of data for their quarterly earnings. Specifically for their reported inventories where they show the value of materials at each step of their manufacturing process, this being; Raw Materials, Work In Process, and Finished Goods.

I realised there's a reasonably strong fit when plotting Work in Process for a given quarter vs Manufacturing Output when adjusting for a quarterly lag. I define manufacturing output of a given quarter as the Cost of Goods Sold (adjusted to remove any GAAP charges) + the delta of Finished Goods.

Manufacturing Output = Adjusted COGS + Δ Finished Goods

Conceptually this makes a lot of sense as complex EUV chips that also require packaging can take almost two full quarters manufacture. I ran this system on pre 2013 data and found the lag was closer to 1 quarter which also makes sense in the simpler DUV era which was paired with lower inventories.

Below are two models comparing the system with a 1.5 and 1.7 quarter lag and result in a R^2 of around 0.4. Note a full 2 quarter lag also produces an ok fit.

https://preview.redd.it/q9xnu2py45kh1.png?width=3025&format=png&auto=webp&s=f3ada7793e8f9bda198bf7021ff6fd42320f9778

Ok so what do we do with all of this?

You can see from the data below Intel posted two consecutive large jumps in WIP in Q4 2025 and Q1 2026 just as the comms around the server chip shortage was getting started. We also all know that Intel crushed their Q2 numbers. According to my hypothesis and model, that Q2 beat should have mostly been off the back of the Q4 2025 WIP ramp up and in Q3 2026 we should see the larger Q1 2026 ramp play out.

So how can we calculate Q3 you ask?

Plugging the WIP values into our Q3 estimate you get

Q3 WIP Signal
= 70% × Q1 WIP growth
+ 30% × Q2 WIP growth

= 0.70 × 14.85%
+ 0.30 × (-3.54%)

= 9.33%

Establish the Q2 manufacturing-output base

Q2 reported:

• COGS = $9.619B
• Q1 finished goods = $2.504B
• Q2 finished goods = $2.761B

​

Q2 Manufacturing Output
= Q2 COGS + change in Finished Goods

= $9.619B + $0.257B

= $9.876B

Calculate Q3 manufacturing output

Apply the predicted +7.94%:

Q3 Manufacturing Output
= $9.876B × 1.0794

= $10.660B

Convert COGS to revenue

Now we apply gross margin separately.

At 42% gross margin (Q2 Non-GAAP was 41.8%):

Revenue=1−0.41COGS​=0.59COGS​

$10.660B / 0.58
= $18.38B

Note I also calcualted the bounds but removed it from the steps above to make this post at least somewhat intelligible

-1 SD: $9.982B / 0.58 = $17.21B
+1 SD: $11.338B / 0.58 = $19.55B

So this gives us a Q3 revenue estimate of $18.38B, which once again beautifully fits into my LBT sandbagging guidance model:

LBT Q3 guidance between $15.8 billion and $16.8 billion

$16.8B + $1.5B = $18.3

Obviously the error bounds are large here so take it with a heap of salt and as always this is just my musings and certainly not #Financial Advice

I also modelled what this would mean for Q3 CPU Server marketshare. Depending if this kind of post gets any traction I'll do a follow up with those figures.

Intel reported quarter-end inventory balances:

| Quarter | Work in Process | Finished Goods | WIP + Finished Goods | WIP QoQ |

|---|---:|---:|---:|---:|

| Q1 2023 | $7,415m | $4,220m | $11,635m | — |

| Q2 2023 | $6,638m | $4,062m | $10,700m | -10.5% |

| Q3 2023 | $6,266m | $3,922m | $10,188m | -5.6% |

| Q4 2023 | $6,203m | $3,758m | $9,961m | -1.0% |

| Q1 2024 | $6,560m | $3,725m | $10,285m | +5.8% |

| Q2 2024 | $6,294m | $3,666m | $9,960m | -4.1% |

| Q3 2024 | $6,971m | $3,657m | $10,628m | +10.8% |

| Q4 2024 | $7,432m | $3,422m | $10,854m | +6.6% |

| Q1 2025 | $7,240m | $3,719m | $10,959m | -2.6% |

| Q2 2025 | $6,484m | $3,699m | $10,183m | -10.4% |

| Q3 2025 | $6,751m | $3,603m | $10,354m | +4.1% |

| Q4 2025 | $7,840m | $2,785m | $10,625m | +16.1% |

| Q1 2026 | $9,004m | $2,504m | $11,508m | +14.8% |

| Q2 2026 | $8,685m | $2,761m | $11,446m | -3.5% |

A few weeks ago there was an article that intel was going to license Atom to a startup which had the tech community scratching their heads on both why they would do this and how this was even possible.

I've been thinking around this and came up a theory but first a little background.

The reason why it's such a strange situation is because x86 as an IP has been for some time in a limbo state between Intel and AMD with neither company owning the whole IP since the AMD 64 extension. Meanwhile Intel Atom conjures memories of those terrible low power cores of the early 2000's. So how can Intel even licence an x86 product to another company without getting sued by AMD for cross licensing the 64 bit extension and why would they even license this core type?

On the core, Intel Atom is actually the brand of their entire E core family and so they could be giving rights to manufacture anything up our current darkmont cores on 18a.

Digging into it what I found is the original patents for AMD 64 have expired. But of course AMD will have continued to produce IP and built it into the x86 architecture since their original work.

However E cores unlike P cores are a stripped down version of the x86 platform and may not even use any of AMDs IP where they still have active patents. What's more interesting is we know that Intel is building unified core from the E core architecture.

So my theory goes that this licensing move on Atom is laying the ground works to show that Intel actually wholly own the E core x86 platform and AMD cannot legally stop them granting rights on it. Intel builds unified core on E core and effectively migrates their modern stack onto something they own entirely while keeping the expired AMD 64 IP. Then Intel start licensing unified core as a modern competitor to Arm.

Obviously this is all just my speculation so don't think much of it, but it does sound like a fun twist and thought it could be worth some discussion.

This is why the price dropped about 2% pre-market. I know this can be a devisive subject but raising capital is a good thing. Intel can sell shares at a far more attractive price than it did last year and fund a faster fab build out.

More fabs capex means they're confident they can take more marketshare. In the future once things normalise I'm sure they'll pay it back with buybacks.

Paywall free: https://archive.ph/FrPEL

AMD just dropped Q2 earnings so I thought I'd post a comparison to Intels figures. Specifically looking at the Q1 > Q2 transition for datacenter:

AMD — Data Center segment

Q1'26 revenue: $5.78B

Q2'26 revenue: $6.72B

+16% QoQ Segment

op income: $1.60B → $2.10B (31% margin)

Intel — DCAI segment

Q1'26 revenue: $5.05B

Q2'26 revenue: $6.26B

+24% QoQ Segment

op income: $1.54B → $2.47B (40% margin)

That's right intel outperformed AMD in datacenter in quarter in both revenue growth, margin, and income. AMD posted larger DC revenue overall but they have a GPU line blended in those numbers.

Rough estimates show Intel recaptured about 3% of the x86 DC market this quarter.

Intels fabs are paying off here as they can scale without having to compete for wafer space and if my Q3 estimates are correct this should only tilt further into Intels favour.

Here's Arms reported Q1 earnings and Q2 guide:

Q1 Revenue: $1.29B (vs $1.26B estimate)
Q1 Adjusted EPS: $0.45 (vs $0.40 estimate)

Q2 revenue guidance: $1.38B (vs $1.34B estimate)
Q2 adjusted EPS guidance: $0.47 (vs $0.43 estimate)

For reference their previous quarter was:
Revenue: $1.49B (vs $1.47B estimate)
Adjusted EPS: $0.60 (vs $0.58 estimate)

This is both less impressive than Intels beat and fairly disappointing guidance for next quarter, unsurprisingly the stock is down in pre-market.

I think this is a confirmation of my hypothesis which is Arm is not as suitable as x86 for server chips, and that Intel can scale faster than TSMC to meet current CPU demand.

If Intel was valued anywhere near Arm we would be well past $200.

What's everyone's estimates for earnings tomorrow?

Here's mine:

Revenue - $15.8B

Income - $2.5B

Q3 Guidance - $16.4B (which would be another $1B+ low ball from LBT)

The article takes a neutral stance but there's some details that are fundamentally bullish. EMIB-T confirmed to have a 36 mu_m metal pitches and has clear visibility to 25 mu_m. This means intel have taken the interconnect density crown from TSMC which makes EMIB cheaper, denser, and supports larger packaging dimensions.

Intel also showcased EMIB-T with a 240mm^2 package which could support 67 reticles (this is like 10x larger than what TSMC can currently do).

And there was a presentation showing Intels glass substrate didn't have cracking issues which TSMC (through Corning) were showing. Also showed working TGV, waveguides and combined with EMIB.

It also links this recent paper detailing intel glass progress (paywalled but abstract available, if anyone has access pls DM me): https://ieeexplore.ieee.org/document/11561301

Also I found this x reaction: https://x.com/trendforce/status/2061448191380258850

TLDR; Intel is not just a viable packaging alternative to TSMC they have leapfrogged them

About 40% better than Turin Dense at rack level. Tbh that's not as large an increase as it could have been. Also Intel GNR is still a mark above Vera. I think DMR shouldn't be too far behind.