Intel Stock Still Trades at 84 Times Earnings After a 35% Drop. I'm Not Buying Yet.

Analysts with JPMorgan Chase upgraded Intel (NASDAQ:INTC) to neutral from underweight on Monday, Oct. 19, citing growing agentic artificial intelligence (AI) workloads and tight supplies of advanced chips. The chipmaker's stock gained around 2% that day, ending at $92.03.

Even after that bounce, shares are around 35% under their record close of $140.94 on June 22. And most of the drop has happened lately. The stock still closed above $127 as late as Sept. 24.

Sure, an upgrade to neutral isn't a call to buy, and I wouldn't buy or sell a stock based on an analyst's rating anyway. What matters more is how much investors now pay for what Intel earns. And by that measure, the stock has gotten far cheaper than its 35% drop suggests.

Image source: Intel.

Intel's earnings have nearly doubled

When Intel set its record in June, its four most recently reported quarters came to non-GAAP (adjusted) earnings per share of just $0.57. That figure included a loss of $0.10 a share in the second quarter of 2025.

At $140.94, then, investors were paying almost 250 times Intel's adjusted earnings for the previous four quarters.

Intel's second-quarter results, released in July, changed that. Revenue rose 25% year over year to $16.1 billion, accelerating sharply from 7% growth in the first quarter and a 4% fall in the fourth quarter of 2025. And adjusted earnings per share climbed to $0.42, up from $0.15 in the fourth quarter of 2025 and $0.29 in the first quarter of 2026.

Combined, the past four reported quarters now total $1.09 a share in adjusted earnings -- nearly double the June number.

At around $92 as I write, Intel trades at about 84 times these earnings. It's still a steep price-to-earnings ratio. But it's around a third of where the ratio was at the record, even though the share price fell only about 35%. In other words, rising profits did more to cut the stock's price-to-earnings ratio than the falling share price did.

Intel's GAAP results look much worse. On that basis, the company lost $2.16 a share for the second quarter. But a non-cash charge of $2.45 a share more than accounted for the loss. The charge is linked to Intel stock held in escrow for the U.S. government under its CHIPS Act deal, so I'm leaning on the adjusted numbers here.

A step back

The next step is a smaller one, though. For the third quarter, management's guidance calls for $0.38 a share in adjusted earnings. This would be up 65% from $0.23 for the third quarter of 2025, but down from the second quarter's $0.42.

Revenue growth may slow, too. The midpoint of Intel's guidance range from $15.8 billion to $16.8 billion implies growth of around 19% year over year, after 25% for the second quarter.

If Intel earned $0.38 a share every quarter over a year, it'd make around $1.52. At around $92 a share, the stock would cost about 60 times that annual pace of earnings.

Demand for AI computing doesn't look like the issue.

"AI-driven compute continues to strengthen, and to support expected growth this year and next across products and foundry, we are meaningfully increasing our investments in equipment, clean room space, and substrates," CFO Dave Zinsner said in Intel's second-quarter earnings release.

Turning that demand into steadily rising earnings per share is what Intel still needs to prove. And the third-quarter guidance suggests the climb might not continue every quarter.

Is the drop big enough?

Based on expected earnings for 2027, Intel trades at around 44 times earnings. That price-to-earnings ratio arguably assumes Intel's profits can keep climbing well past the third quarter's pace. Intel posts third-quarter results on Thursday, Oct. 29, which might show whether the $0.38 forecast was cautious or the start of a flatter stretch.

Does the 35% drop make Intel stock a buy? I don't think so yet. The drop, plus a far stronger second quarter, has moved the price a lot closer to what Intel earns. But at around 84 times adjusted earnings in the past four quarters, the stock still prices in lots of growth that hasn't come yet.

I'd want to see adjusted earnings per share climb back above the second quarter's $0.42 before considering the stock at this price.

JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and JPMorgan Chase. The Motley Fool has a disclosure policy.