Intel reported quarterly profit and revenue forecasts that surpassed market expectations on Thursday. This led to a 5.2% rise in the company's shares after the close of trading. Increased demand for Intel processors in data centers is prompting the company to increase its spending plans for the next two years.
According to data collected by LSEG, Intel expects third-quarter revenue to be between $15.8 billion and $16.8 billion, exceeding the average analyst estimate of $15.1 billion. The projected adjusted earnings per share is estimated at $0.38, compared to analysts' estimates of $0.27.
The company is benefiting from the boom in so-called agentic AI, where autonomous agents perform tasks, such as writing computer code on behalf of users. Although Intel's shares have fallen more than 25% from their record high of June 22 amid a general slump in chip stocks, they have still risen by over 170% over the past year.
The results confirm CEO Pat Gelsinger's strategy to restore technological leadership and compete with rivals such as Nvidia and AMD in the growing AI chip market. Investors are closely monitoring Intel's businesses in data centers and contract manufacturing (foundry) as key indicators of this turnaround's success.
During the conference with analysts, Gelsinger stated that the second quarter events prompted Intel to focus entirely on mass production of chips using its upcoming 14A manufacturing technology in 2028. Last year, Intel had warned that it might have to abandon 14A if it couldn't find a major customer, which would effectively deprive the US of the ability to participate in creating the world's fastest chips.
Gelsinger noted: 'I am pleased to see the growing momentum in working with customers on Intel 14A, and I am increasingly confident that 14A will be a very competitive process.'
For the second quarter, ending June 27, Intel reported a 25.4% increase in sales to $16.13 billion, with adjusted earnings of $0.42 per share, higher than the forecast of $14.42 billion and $0.21 per share. Adjusted gross margin reached 41.8% against an expected 38.8%.
Shay Bolur, chief market strategist at the technology research firm Futurum Group, stated that 'shares could continue to rise if Intel turns the current shortage in data centers into sustainable revenue growth, improves foundry economics, and finally announces external customers needed to validate the next phase of the manufacturing turnaround.'
The shift towards AI agents has spurred renewed demand for data center CPUs. Intel executives reported earlier this year that this growth caught them off guard, as CPU orders exceeded the company's production capacity.
CFO David Zinsner announced that the surging demand prompted Intel to raise its capital expenditure forecast for the current year from $18 billion to $20 billion, with expenses expected to 'increase significantly next year.'
Zinsner added that Intel has secured long-term agreements with customers for data center CPUs and specialized chips called XPUs ranging from three to five years. Some of these agreements include both volume and pricing commitments, while others contain only volume commitments. He cautioned that Intel would be disciplined with spending, noting that such deals could be revised if conditions changed.
Zinsner also specified that Intel has about $30 billion in cash and a $10 billion credit line, and did not rule out selling stock, although there are no plans at this time. He said: 'I wouldn't rule out the possibility that we do. But at this stage, there are no specific plans.'
Intel's revenue in the data center and AI segment for the second quarter was $6.26 billion, exceeding forecasts of $5.37 billion. Sales in the notebook and desktop segment reached $8.88 billion in the second quarter, compared to forecasts of $7.89 billion. Zinsner explained that although sales volume dropped, average prices increased because Intel moved away from cheaper entry-level chips and returned to high-performance chips.
Intel's foundry business generated $5.77 billion in sales in the second quarter, higher than analyst estimates of $5.55 billion. The company secured a customer in Tesla, owned by Elon Musk, for its next-generation 14A process under the 'Terafab' AI project. In April, expectations rose for another major win after U.S. President Donald Trump announced that Apple agreed to manufacture processors using Intel technologies. Neither company confirmed this deal.
Bob O'Donnell, president and chief analyst at Technalysis Research, noted: 'After Pat Gelsinger took over, there were constant questions surrounding the foundry business shrouded in cloud of uncertainty. Now all those clouds have cleared.'
Intel released its second-quarter financial results on Thursday (23), surpassing market projections and achieving the highest quarterly revenue growth rate since 2011. This positive performance was significantly driven by the growing demand for artificial intelligence (AI) infrastructure, which boosted sales of server processors.
The company reported an adjusted earnings per share of $0.42 (equivalent to R$ 2.14), exceeding the estimate of $0.21 (R$ 1.07) set by the LSEG consensus. Total revenue reached $16.1 billion (R$ 82.1 billion), surpassing analyst forecasts, which expected $14.4 billion (R$ 73.5 billion). Furthermore, the company presented optimistic outlooks for the current quarter, forecasting an adjusted earnings per share of $0.38 (R$ 1.94) and projected revenue between $15.8 billion and $16.8 billion (R$ 80.6 billion/R$ 85.6 billion).
Intel attributed the 25% revenue growth—the largest recorded in any quarter since the third quarter of 2011—to the advancement of AI, which intensifies the need for computational capacity, primarily benefiting server processor sales. In a statement, CEO Lip-Bu Tan emphasized the impact of AI on business expansion, stating that the technology is generating unprecedented demand for computing power and that Intel is well-positioned to achieve sustainable growth in its processor line.
The company has begun negotiating long-term contracts with customers for its server processors. These agreements may include pre-defined prices or be structured focusing on chip volume. Intel has already formalized ten such contracts. CFO David Zinsner mentioned that the company faces supply constraints, as data centers are requesting more processors than current production capacity allows. Such contracts have become more frequent, especially in the memory sector, serving as a mechanism to maintain high prices and market power should AI demand decrease in the future.
The client computing unit, responsible for personal computer processors, remains Intel's largest division, recording 13% revenue growth in the second quarter, totaling $8.9 billion (R$ 45.4 billion). However, the data center segment showed the fastest growth, advancing 59% compared to the same period last year, reaching $6.3 billion (R$ 32.1 billion). The company forecasts stability in PC sales in the third quarter due to memory shortages.
Additionally, Intel plans to substantially increase its capital investments next year, aiming to accelerate its transition to a semiconductor foundry for third parties. David Zinsner commented that the company's latest manufacturing process, named 14A, is more advanced than previous technologies at equivalent stages. The foundry unit generated $5.8 billion (R$ 29.6 billion) in revenue this quarter, representing a 31% year-over-year increase. Although most of the foundry's production is destined for Intel's own processors, Fortinet was announced as the first public customer of this unit since Lip-Bu Tan took the helm, although it uses an older manufacturing technology.
A notable indicator of improvement was Intel's gross margin, which rose to 42% in the second quarter, compared to just 2.5% in the same period last year. The company explained that this recovery was facilitated both by economies of scale resulting from increased revenue and by selling chips at higher prices and superior margins.
