Q2 results mark strongest revenue growth in over a decade
Intel reported second-quarter revenue of $16.13 billion for the period ended June 27, up 25.4% from a year earlier and above the analyst consensus of $14.42 billion compiled by LSEG. Adjusted earnings came in at 42 cents per share versus expectations of 21 cents, while adjusted gross margin reached 41.8%, compared with estimates of 38.8%. Chief Executive Lip-Bu Tan described the quarter as the company's strongest revenue growth in more than 15 years, with year-on-year gross margin improving to roughly 40% from around 28%. Shares rose about 5% in after-hours trading following the release, though they had closed down 2.3% during the regular session; the stock remains up more than 170% year to date despite a pullback from a June 22 record close.
AI agent buildout resurges demand for data-centre CPUs
Intel attributed the earnings beat to a boom in agentic AI, where autonomous software agents perform tasks such as coding on behalf of users, saying the resulting buildout of AI data centres has driven a sharp increase in demand for its central processing units. The Data Center and AI division generated $6.26 billion in revenue, up 59% year-on-year and ahead of the $5.37 billion analyst estimate. Chief Financial Officer David Zinsner told analysts that Intel's ability to supply server chips is currently constrained, with demand exceeding what the company can manufacture. The Client Computing Group, which sells laptop and desktop processors, reported $8.88 billion in revenue, up 13% year-on-year, though Zinsner noted that unit shipments declined while average selling prices rose as Intel shifted away from entry-level chips toward higher-end devices.
Capital spending raised and 14A production plan locked in
Buoyed by the demand outlook, Intel raised its 2026 capital expenditure forecast from $18 billion to $20 billion, with Zinsner telling Reuters that spending is expected to be "up meaningfully next year" as well. On the conference call, Tan said customer demand had convinced Intel to become "fully committed" to high-volume production of chips made with its next-generation 14A manufacturing technology in 2028. Last year Intel had warned it could abandon 14A if it failed to secure a major external customer, a path that would have weakened US efforts to manufacture the most advanced semiconductors domestically. The company ended the quarter with around $30 billion in cash and access to a further $10 billion credit facility, and Zinsner did not rule out a future share offering, though none is currently planned.
Foundry business gains traction with Tesla and long-term contracts
Intel's contract manufacturing, or foundry, business generated $5.77 billion in second-quarter revenue, up 31% year-on-year and ahead of the $5.55 billion analyst estimate. The unit secured Tesla as a customer for its 14A process to support the "Terafab" AI chip project, bolstering confidence in efforts to land major external buyers. Zinsner said Intel has signed three- to five-year agreements with customers covering data-centre CPUs and specialised AI chips known as XPUs, with some contracts including commitments on both pricing and volumes and others covering volumes only. Investor focus on a potential high-profile Apple manufacturing arrangement has persisted since President Donald Trump said in April that Apple had agreed to make processors with Intel, though neither company has confirmed such a deal.
Outlook and guidance for the third quarter
For the third quarter, Intel guided to revenue of $15.8 billion to $16.8 billion, above the $15.1 billion analyst estimate, and adjusted earnings of 38 cents per share versus expectations of 27 cents. The company projected a gross margin of about 41%. Intel also noted that global memory shortages are likely to weigh on PC sales, with revenue in the client computing group expected to be roughly flat next quarter. Earlier in July, Intel announced a €5 billion investment at its Leixlip campus in Kildare, Ireland, as part of its broader capacity expansion.
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