The wave of AI computing power drives CPU demand to soar, and the suspicion of outsourcing business completely dissipates. Intel Corporation(INTC.US) Q2 revenue welcomes the strongest growth rate in fifteen years.

After the U.S. stock market closed on Thursday, global semiconductor giant Intel Corporation (INTC.US) handed in a report card that far exceeded market expectations. Not only did its revenue and profits in the second quarter significantly surpass Wall Street estimates, its guidance for the third quarter also crushed analyst forecasts, showing that the wave of AI-driven data center spending is accelerating the revival process of this veteran chip giant. According to the financial report, for the second quarter ending on June 27, Intel Corporation achieved revenue of $16.13 billion, a year-on-year increase of 25.4%, the strongest quarterly revenue growth since 2011. Adjusted earnings per share were $0.42, with an adjusted gross margin of 41.8%, a significant increase of 12 percentage points from the same period last year. In comparison, the market's average expectations were revenue of only $14.42 billion, earnings per share of $0.21, and a gross margin of 38.8%. Management emphasized that this is the seventh consecutive quarter that the company has outperformed its financial guidance, with demand exceeding the continuously growing supply in all business units. What excited investors even more is the guidance for the third quarter. Intel Corporation expects revenue to reach $15.8 to $16.8 billion for the quarter, easily surpassing the average analyst estimate of $15.1 billion even at the low end of this range; adjusted earnings per share are expected to be $0.38, also significantly higher than the market's expectation of $0.27. After the financial report was released, Intel Corporation's stock price surged more than 13% in after-hours trading, although the increase narrowed later on. Despite a cumulative decline of over 25% since hitting an all-time high on June 22 due to overall selling in the chip sector, the stock's year-to-date gain still exceeds 170%. Agentic AI Drives New CPU Demand in Data Centers The biggest highlight of this financial report is that the shift of the AI industry's focus is putting Intel Corporation's core product - central processing units (CPUs) back in the spotlight. With the industry transitioning from training large models to deploying "Agentic AI" that can autonomously perform tasks on a large scale, the demand for general-purpose CPUs is surging. In the second quarter, revenue from Intel Corporation's data center and AI business unit reached $6.3 billion, a staggering increase of 59% year-on-year, more than double the overall revenue growth of the company and higher than the market's expectation of $5.37 billion. CEO Lip-Bu Tan bluntly stated, "In the data center, CPUs are taking off." He mentioned that the demand is exceeding Intel Corporation's continuously increasing supply capacity, which he described as "a sweet headache." During the conference call, Tan further added that the second-quarter server CPU growth rate set a historical record, with the Xeon 6 product line becoming one of the fastest-growing products in the company's history. This supply shortage situation has prompted the company to significantly increase its capital expenditure plan. CFO David Zinsner revealed that due to the surge in demand, Intel Corporation has raised its capital expenditure budget for this year from the previous $18 billion to $20 billion. Zinsner further disclosed that capital expenditure for 2027 will be "significantly higher" than in 2026, with the majority going towards the U.S. factory network. The company is already locking in equipment purchase orders, accelerating cleanroom construction, and ensuring substrate and memory supply. Zinsner also stated that the company has signed long-term contracts ranging from three to five years with customers for data center CPUs and XPUs among other chips, with some contracts locking in both procurement volume and prices, providing higher revenue visibility for the future. By the end of the quarter, the company had approximately $30 billion in cash and a $10 billion credit line, Zinsner did not rule out the possibility of issuing additional shares in the future, but stated that there are currently no specific plans. Foundry Business Doubts Dispelled, Breakthrough Client for 14A Process The revival strategy of the foundry business championed by Lip-Bu Tan has released clearer positive signals this quarter. Intel Corporation's foundry services department, Intel Foundry Services, achieved revenue of $5.8 billion in the second quarter, a 31% increase year-on-year, higher than analyst expectations of $5.55 billion. In terms of advanced processes, Tan explicitly stated during the conference call that Intel Corporation has "fully committed" to use its most cutting-edge 14A manufacturing process for large-scale production by 2028. Last year, the company had warned that failing to find key customers or being forced to abandon 14A could lead to the U.S. falling out of the global race for the fastest chip manufacturing. Now, Tan says that customer engagement for the 14A process is continuously increasing, giving him "increasing confidence that 14A will become a highly competitive process." Behind this confidence is the actual landing of heavyweight clients. Intel Corporation has successfully won orders from Tesla, Inc. (TSLA.US) to manufacture its next-generation AI chips for Musk's "Terafab" project. Additionally, in April this year, then-President Trump announced that Apple Inc. (AAPL.US) had agreed to have Intel Corporation handle its processors, although both parties have yet to officially confirm the deal, market expectations are already on the rise. Tan revealed that revenue from design services has almost tripled year-on-year, and announced a partnership with Fortinet, Inc. (FTNT.US) to develop secure processors, reflecting their ASIC strategy; Zinsner stated that ASIC business annualized revenue is approaching $2 billion, while Tan pointed out that the target market opportunity is expected to exceed $100 billion. Furthermore, there is strong interest in the advanced packaging technology EMIB-T, with a growing backlog of orders, meeting both yield and reliability standards, and the company is committed to improving it to high production and quality standards to support customer mass production in 2027. Jay Goldberg, analyst at Seaport Group, commented on this, stating that Intel Corporation still needs to continuously prove itself in the long term, but the latest financial report undoubtedly sends positive signals. "The company's recent strong momentum will provide support for the improvement of its long-term fundamentals." Shelly Boland, Chief Market Strategist at Futurum Group, believes that if Intel Corporation can turn the current shortage of data center chips into sustainable revenue growth, improve the economic model of its foundry business, and ultimately announce a list of external customers that validate its manufacturing transformation into the next stage, there is still room for further revaluation of its stock price.