Intel’s turnaround under CEO Lip-Bu Tan gains steam with another strong quarter
Shares of Intel rose after the chipmaker reported strong quarterly results and offered an optimistic outlook for the third quarter. We expect further gains under the guidance of CEO Lip-Bu Tan. In the second quarter, revenue rose 25% year over year to $16.1 billion, beating the $14.42 billion consensus estimate compiled by LSEG. Non-GAAP earnings per share (EPS) came in at a profit of 42 cents, from a loss of 10 cents a year ago, beating LSEG’s forecast of 21 cents. Intel rose nearly 4% in after-hours trading to about $104 per share. It rose to around $113 in response to the results. INTC 1Y mountain Intel 1-year return As a result, it’s hard not to be impressed by Lip-Bu Tan, who became CEO in March 2025 and changed the company’s culture from a money-losing company to a profitable, growing operation. Meanwhile, Intel is regaining investor confidence after years of disappointment. To be fair, some of this success is down to the incredible demand for AI infrastructure. Customers are underutilizing x86 CPUs to run agency AI tasks. The advanced packaging business has become strategically important in the age of artificial intelligence; It connects systems consisting of multiple small chips, allowing them to behave as a single chip. The foundry business also provides a strategic advantage, allowing Intel to produce its own AI CPUs without relying on industry leader Taiwan Semiconductor Manufacturing Corporation (TSMC). With these tailwinds at its back and disciplined leadership, Intel beat its own revenue forecast by $1.8 billion and more than doubled its Non-GAAP EPS estimate, reporting $0.42 versus the company’s $0.20 outlook. The slight disappointment this evening was that the company did not announce any major customers for its foundry. Many big names, including Apple, are said to be partnering with Intel, but no official agreement has been announced. We expect deals to be announced as Intel demonstrates the power of its manufacturing technology. Another thing to watch is capital expenditures. Intel expects capex to reach more than $20 billion in 2026, citing strong customer demand signals. This is an increase of approximately $3 billion over previous expectations. And for 2027, the company expects capex to increase significantly as it invests across its U.S. network. Capital spending has become a dirty word among tech investors because the more hyperscalers spend, the more their stocks fall due to uncertainty about the return on those investments. Building a factory can be very expensive, but these are smart investments because demand is there and customers will want more of chips made in the US to reduce their geopolitical risk. Intel’s foundry is a logical winner for those who can’t get enough supplies from Taiwan Semiconductor. Based on the strength in the quarter and the positive outlook for the future, we reiterate our 1 rating and $140 price target. Why we have it Intel is benefiting from the AI boom in several ways: Its data center CPUs are in demand to power AI agent-driven tasks, while its foundry business allows the company to produce its own processors as well as chips designed by other companies. Competitors: Taiwan Semiconductor, AMD, Arm Holdings Last purchased: July 13, 2026 Start date: June 3, 2026 Description The customer computing and physical AI group segment delivered strong results despite softening in the PC market. The company said AI PC revenues rose 26% sequentially, and edge deployments (computing close to where data is created) now account for about 10% of segment revenue. Higher average selling prices helped increase sales, not only from sales to high-end customers, but also by passing some of the cost inflation on to the end customer. The company’s data center and AI segment delivered standout performance, with revenue up $2.3 billion year over year and operating income up $1.8 billion, driven by strong demand from hyperscalers and enterprise customers. Intel has also managed to push CPU price increases to increase profits as industry supply cannot meet demand in the age of artificial intelligence. And as customers race to lock in supply and hedge against rising prices, they’re flocking to Intel to secure long-term supply agreements, similar to what we’ve heard from Micron and Sandisk. How much can the data center CPU market grow? Intel was hesitant to provide numbers on AMD’s $220 billion CPU market forecast by 2030, which it gave at its investor event on Thursday. However, management has noted the ratio of CPUs to GPUs in AI server racks. As we have explained several times, CPUs are better equipped to handle agency tasks compared to GPUs. The rise of the agency AI era has pushed the ratio of CPUs to GPUs from 1 to 8 to 1 to 4 in the early stages of the AI era. Today, Intel believes the ratio is nearly equal (1 to 1) and expects the ratio to skew even more towards CPUs in the future. Intel’s foundry business, which primarily produces Intel’s own chips, continued to thrive. This unit used to be a mess and struggled to meet the efficiency and reliability customers needed. But it made progress under Tan’s operational and technological leadership. While revenue rose 31% from the prior year, losses narrowed for the second straight quarter as rising yields and faster cycle times pushed supply above management’s internal target. Looking ahead, Intel’s most advanced manufacturing process, called 14A, is expected to enter at-risk production of internal products in the second half of 2027, after which Tan will decide whether to enter high-volume production in 2028. Outlook Turning to guidance, Intel expects revenue to be in the range of $15.8 billion to $16.8 billion. The $16.3 billion midpoint is a healthy estimate compared to the $15.1 billion consensus estimate. The Company expects overall GAAP gross margin to be 41.0% and non-GAAP gross margin to be 42.0%; This means a 2 point improvement compared to last year. These are both stronger than the non-GAAP estimate of 40.5%. As a result, non-GAAP earnings per share were estimated to be 38 cents; That’s big compared to consensus analysts’ estimate of 27 cents. Intel earned 23 cents in the third quarter of 2025. (Jim Cramer’s Charitable Trust is long INTC. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. 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