Intel Q2 Earnings Call Highlights

• AMD’s $5 Billion Anthropic Deal Could Redraw the AI Chip Battle

Intel (NASDAQ:INTC) executives said the company delivered another quarter above its financial outlook, as demand for client and data center products continued to exceed available supply and management moved to increase capital spending to support future growth.

Chief Executive Lip-Bu Tan said second-quarter revenue, gross margin and earnings per share all came in above guidance, marking the company’s seventh consecutive quarter of exceeding its financial expectations. “Strong demand for our products continue to outpace our growing supply,” Tan said, adding that Intel’s design and manufacturing execution is improving and that operating discipline put in place over the past 15 months is producing tangible results.

• One Short- and One Long-Term ETF for Quantum Computing Bulls

Chief Financial Officer David Zinsner said second-quarter revenue was $16.1 billion, $1.8 billion above the midpoint of Intel’s guidance. Non-GAAP gross margin was 41.8%, about 280 basis points better than guidance, while non-GAAP earnings per share were $0.42, compared with guidance of $0.20. Operating cash flow was $7 billion, and Intel ended the quarter with about $30 billion in cash and short-term investments.

AI Demand Drives Client and Data Center Results

Zinsner said Intel’s “AI-driven businesses” grew more than 70% year over year, including record data center growth, and contributed about 70% of total revenue. However, he said demand continues to outstrip supply even after the company exceeded its expectations for wafer output in the quarter.

• A Market Panic Just Discounted the AI Highway's Tollbooth

The Client Computing and Physical AI Group, or CCPG, generated revenue of $8.9 billion, up 15% sequentially and above expectations. Zinsner said AI PC revenue rose 26% sequentially and now accounts for two-thirds of the client revenue mix. Edge deployments represented roughly 10% of CCPG revenue. The segment posted operating profit of $2.3 billion, or 26% of revenue, down about $173 million sequentially due to inventory charges tied to optimizing the factory network.

The Data Center and AI Group reported revenue of $6.3 billion, up 24% sequentially and 59% year over year, also meaningfully ahead of expectations. Zinsner said the result was driven by strong demand across hyperscale and enterprise customers. Operating profit for the segment was $2.5 billion, or 40% of revenue, up about $1 billion from the prior quarter due to higher revenue, improved product margins and lower operating expenses.

Tan said demand accelerated as customers increasingly recognize the role of CPUs, and x86 CPUs in particular, in AI infrastructure. He said second-quarter year-over-year server growth was the strongest on record and that Xeon 6 remains one of the fastest-ramping products in Intel’s history.

Foundry Roadmap Gains Emphasis

Tan said his confidence in Intel Foundry’s process roadmap has grown significantly since he joined the company. During the quarter, he said Intel factories across Intel 7, Intel 3 and Intel 18A exceeded internal volume targets due to improving yields, better cycle times and rising wafer starts.

Zinsner said Intel Foundry revenue was $5.8 billion, up 6% sequentially on higher fab volumes driven by Intel 18A growth. He said 18A output was approximately 25% above target and more than 50% higher quarter over quarter. External foundry revenue was $293 million. Intel Foundry reported an operating loss of $2.1 billion, an improvement of $348 million from the prior quarter.

Tan said 18A output increased meaningfully in the quarter, with yields tracking ahead of expectations, and that Intel is ramping multiple new products on 18A, including Panther Lake and Wildcat Lake. The company also began risk production of 18A-P, which Tan said provides additional performance and power advantages while maintaining compatibility with Intel 18A.

Looking further ahead, Tan said Intel 14A development is progressing, with defect density and transistor performance outpacing 18A development. He said PDK 0.5 is complete and PDK 0.9 remains on track for October. Intel remains on track for 14A risk production for internal products in the second half of 2027 and made the decision in the second quarter to fully commit to a high-volume ramp in 2028.

Capital Spending Outlook Raised

Intel is raising its 2026 capital spending outlook and now expects CapEx of more than $20 billion, Zinsner said. He added that 2027 capital expenditures are expected to be significantly above 2026 levels, with the vast majority spent across Intel’s U.S. network. Zinsner said the company is locking in tool purchase orders, accelerating clean room build-outs and securing substrate and memory supply.

During the question-and-answer portion of the call, Zinsner said the higher CapEx plan is broad-based, including advanced packaging, though front-end fabs will account for a larger portion because they are more expensive than packaging facilities. He said the increased investment reflects confidence in customers across Intel’s business units, particularly where the company has signed long-term agreements.

Zinsner said Intel remains disciplined in its spending and will put capital in place when it believes it can generate strong returns. He also noted that Intel expects investment tax credits on U.S. spending, though timing delays affect when those benefits are realized.

Third-Quarter Guidance Reflects Supply Constraints

For the third quarter, Intel guided revenue to a range of $15.8 billion to $16.8 billion. At the midpoint of $16.3 billion, the company expects non-GAAP gross margin of 42%, a tax rate of 11% and non-GAAP EPS of $0.38.

Zinsner said industrywide supply constraints across wafers, memory and substrates remain the dominant challenge for customers supporting the AI infrastructure build-out. He said Intel’s wafer output exceeded expectations from 90 days earlier, and quarter-to-date 18A yields in the third quarter are trending ahead of targets set in March. Even so, he said supply remains very tight, especially for servers, with supply growth skewed toward the end of the third quarter and into the fourth quarter.

Intel expects PC consumption to be sub-seasonal in the second half and down low-double-digit percent for all of 2026, affected by rising memory prices and constraints. Zinsner said Intel’s outlook for server CPU demand has improved since the prior earnings report, with the company forecasting strong double-digit industry unit growth this year and next, with momentum extending into 2028.

Management Highlights ASICs, Packaging and Memory

Executives also pointed to longer-term opportunities in purpose-built silicon, advanced packaging and external foundry services. Tan said Intel’s design services revenue grew nearly three times year over year and cited a collaboration with Fortinet for a security processor as part of the company’s ASIC strategy. In response to an analyst question, Zinsner said Intel’s ASIC business is approaching a $2 billion run rate, while Tan described the broader opportunity as a potential market of more than $100 billion.

Tan said customer interest in EMIB-T advanced packaging remains high and that Intel has a growing backlog. He said yields and reliability are hitting targets, with the company focused on ramping the technology to high volume and quality to support customer ramps in 2027.

On memory, Tan said it has become a major supply constraint in AI infrastructure and that Intel is collaborating with the three major memory vendors. He also said the company is exploring ways to better integrate compute and memory and improve memory utilization, while pointing to Intel’s history in memory and the recent hiring of Seok-hee Lee, the former CEO of SK hynix.

About Intel (NASDAQ:INTC)

Intel Corporation, founded in 1968 by Robert Noyce and Gordon E. Moore and headquartered in Santa Clara, California, is a leading global designer and manufacturer of semiconductor products. The company is historically notable for introducing the first commercial microprocessor and for driving the x86 architecture that underpins many personal computers and servers. Intel's core business spans the design, fabrication and marketing of processors, chipsets and related components for a wide range of computing applications.

Intel's product portfolio includes client and mobile processors marketed under brands such as Intel Core and Pentium, as well as high-performance Xeon processors for data centers and cloud infrastructure.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

Where Should You Invest $1,000 Right Now?

Before you make your next trade, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.

Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.

They believe these five stocks are the five best companies for investors to buy now...

See The Five Stocks Here

Source MarketBeat