Second-Quarter Results Exceed Expectations
Intel Corporation reported financial results for the second quarter of fiscal 2026 that significantly surpassed Wall Street expectations. Revenue reached more than $16 billion, representing a 25 percent increase compared to the same period last year. This marks the company’s fastest revenue growth since late 2011, a milestone that underscores the momentum driven by CEO Lip-Bu Tan’s turnaround strategy. Adjusted earnings per share (EPS) came in at $0.42, exactly double the consensus estimate of $0.21 from financial analysts. The strong performance was primarily fueled by the data centre and artificial intelligence (AI) division, which saw revenue surge 59 percent year-over-year to exceed $6 billion. This segment has become the primary engine of growth as enterprises and cloud providers accelerate their investments in AI infrastructure.
The client computing group, which supplies chips for personal computers, also contributed with a 13 percent revenue increase to nearly $9 billion, reflecting steady demand in the consumer and commercial PC markets. Meanwhile, Intel’s foundry business—the contract chip manufacturing arm that the company has been building under Tan—posted revenue of nearly $6 billion, up 31 percent from a year ago. Gross margin improved dramatically to 42 percent, compared to less than 3 percent in the same quarter of 2025. This recovery highlights both the stronger demand environment and the cost-discipline measures Tan has implemented since taking over in March 2025. The company had previously struggled with margin compression due to heavy investment in new fabrication technologies and a challenging demand cycle.
AI and Data Centre Lead Growth
The data centre and AI division’s 59 percent revenue surge is particularly noteworthy given that Intel had lost significant market share to competitors such as NVIDIA and AMD in recent years. The division’s resurgence is attributed to the company’s new product lineup, including the Xeon 7-series processors optimized for AI workloads and the Gaudi AI accelerators that have gained traction with hyperscale customers. Intel has also benefited from the broader AI boom, with hyperscalers like Microsoft, Amazon, and Google expanding their data centre capacity. CEO Lip-Bu Tan noted during the earnings call that “AI is driving unprecedented demand for compute,” and that Intel’s advanced 14A manufacturing process was running ahead of schedule. The 14A node is critical for Intel’s foundry aspirations, as it aims to compete with Taiwan Semiconductor Manufacturing Company (TSMC) in the race to produce the most advanced chips.
Supply constraints in the data centre segment were also highlighted by management as a positive problem—demand is outstripping Intel’s ability to produce enough high-performance chips. This is a reversal from the inventory gluts that plagued the company in prior years. The client computing business, while growing, faced headwinds from a global memory shortage that is expected to cause flat PC sales in the third quarter. Intel’s PC chip revenue, however, remained robust as the company continued to benefit from the Windows 11 upgrade cycle and the shift toward AI-enabled PCs with neural processing units (NPUs).
Foundry Business Progress and Challenges
Intel’s foundry business is central to its long-term strategy, but investor skepticism remains. The company announced it had signed 10 long-term foundry customer agreements, but it has yet to secure a marquee name for its most advanced manufacturing nodes. Fortinet, the cybersecurity company, was named as Intel’s first announced foundry customer under Tan earlier this month. However, the deal uses an older manufacturing process rather than the cutting-edge 18A or 14A nodes that Intel needs to prove its technical competitiveness. The foundry revenue of $6 billion includes internal sales to Intel’s own product groups, meaning the external customer base is still relatively small. Analysts are watching closely for wins from major fabless companies like Qualcomm, Apple, or AMD, which currently rely on TSMC. The Chips Act funding from the U.S. government has provided financial support, but turning that into commercial success requires not just advanced processes but also a robust design ecosystem and reliable yield improvements.
Intel’s manufacturing roadmap calls for the 14A node to enter production in 2027, with risk production expected to begin by late 2026. Tan has accelerated R&D spending in this area, but the capital investment required is enormous. The company’s gross margin, while improved, is still below the historical levels above 50% that investors once took for granted. The foundry business is expected to be a drag on margins for several years before it becomes profitable. Nonetheless, Intel’s management remains optimistic, pointing to the 10 customer agreements as evidence of growing traction.
Government Stake and Market Reaction
The second-quarter results arrive against a backdrop of significant government involvement in Intel. Through a Chips Act agreement signed in August 2025, the U.S. government acquired roughly $9 billion in Intel shares at an average price of just over $20 each, giving it a stake of about 10 percent. That investment is now worth considerably more on paper, but the stock’s volatility—especially a 28 percent decline in July 2026—has eroded billions in value even as the underlying business improves. The government’s stake is part of a broader strategy to re-establish domestic semiconductor manufacturing capabilities. Intel is the largest beneficiary of the Chips Act, receiving grants and loans to build new fabs in Arizona, Ohio, and Oregon. However, the market’s reaction to the Q2 beat was lukewarm: shares initially rose in after-hours trading but quickly reversed, reflecting persistent doubts about whether Intel can turn its manufacturing ambitions into sustainable growth.
The stock has still gained more than 170 percent year-to-date, making it one of the best performers in the semiconductor sector. Yet the July selloff highlights the fragility of investor confidence. Some analysts worry that the AI boom may be peaking, while others question Intel’s ability to execute on its foundry roadmap. The company guided third-quarter revenue between $15.8 billion and $16.8 billion, above the consensus of $15.2 billion, with adjusted EPS of $0.38 against a $0.27 estimate. This guidance suggests continued momentum, but the market is looking for more than just numbers—it wants proof that Intel can secure high-volume customers for its advanced nodes.
Outlook and Broader Industry Context
Intel’s turnaround under Lip-Bu Tan has delivered seven consecutive quarters of earnings beats, a streak that indicates the company is on a more stable footing than it was two years ago. Tan’s emphasis on cost discipline, operational efficiency, and product innovation has yielded tangible results. However, the competitive landscape remains fierce. NVIDIA’s data centre revenue has surged far beyond Intel’s, and AMD is also gaining ground in both server and client markets. TSMC continues to dominate advanced foundry services, with Apple, NVIDIA, and AMD as its key customers. Intel’s foundry pitch hinges on offering a combination of American-made chips, a comprehensive IP portfolio, and a unique hybrid manufacturing model that blends internal product production with external customer work. The company also benefits from geopolitical tailwinds: the U.S. government’s push to reduce reliance on Asian semiconductor manufacturing has created a favorable environment for onshoring.
The flat PC sales outlook for the third quarter, driven by a memory shortage, may temper investor enthusiasm for the client computing segment. Memory prices have risen sharply due to supply constraints in DRAM and NAND markets, leading some PC OEMs to scale back orders. Intel’s client revenue is expected to be roughly flat in Q3 compared to Q2, but the AI PC category—which includes chips with integrated NPUs—could provide a long-term growth catalyst. Enterprise customers are beginning to refresh their fleets with AI-capable devices, a trend that Intel hopes will accelerate in 2027.
In the data centre, Intel’s Gaudi AI accelerators have started to gain adoption, but the market remains dominated by NVIDIA’s CUDA ecosystem. Intel is investing in software tools to make its hardware more attractive, but it faces an uphill battle. The supply constraints mentioned by Tan could be a double-edged sword: while they indicate strong demand, they also risk frustrating customers if Intel cannot fulfill orders in a timely manner. The company is working to expand capacity at its fabs in Ireland, Israel, and the U.S. to alleviate the bottleneck.
The Fortinet deal, while not using the most advanced node, is a stepping stone. It demonstrates that Intel can attract external customers, and it lays the groundwork for future deals on the 18A or 14A nodes. Tan has hinted that a major foundry customer announcement could come within the next year. If that happens, it could significantly boost Intel’s credibility in the foundry space. For now, investors are in a wait-and-see mode, watching for signs that Intel can convert its manufacturing ambitions into the kind of customer wins that justify its extraordinary stock run. The company’s ability to navigate the memory shortage, maintain data centre supply, and secure advanced-node foundry customers will determine whether the turnaround can be sustained over the long term.