Intel Surges 12% as AI Drives Earnings Momentum

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•  23 Jul 2026
 

$INTC Intel surged about 12% in after-hours trading after reporting a quarter far stronger than analyst estimates and signaling that demand for AI infrastructure is returning the company to growth. Revenue jumped 25% to $16.1 billion, compared with the market forecast of about $14.4 billion, while adjusted earnings reached $0.42 per share, nearly double the expected $0.22. In the comparable quarter, Intel reported an adjusted loss of $0.10 per share on revenue of $12.9 billion, marking a sharp shift in earnings momentum. GAAP gross margin rose from 27.5% to 40.4%, while adjusted gross margin increased from 29.7% to 41.8%, driven by stronger server processor demand, improved factory yields, shorter production times, and spending discipline.

Intel reported GAAP operating income of about $1.8 billion, compared with an operating loss of about $3.2 billion in the comparable period. Adjusted operating income reached $2.77 billion, compared with an adjusted loss of about $500 million last year. Research, development, marketing, and administrative expenses declined 6% to about $4.5 billion, despite accelerated development of new chips and manufacturing processes.

The bottom line included an unusual GAAP loss of $11 billion, or $2.16 per share. The gap between operating performance and the reported result mainly reflected a loss of about $12.5 billion related to an accounting valuation adjustment on shares held in trust. This component reflects a valuation change and does not indicate a similar loss in ongoing chip operations. Excluding the accounting items, Intel reported net income of about $2.2 billion.

The data center and AI division generated revenue of $6.3 billion, a 59% increase within one year. Cloud companies and enterprise customers are expanding computing infrastructure, supporting demand for Intel server processors used for data processing, model operation, and inference from AI systems. Intel holds a different position from Nvidia because it trails in the accelerator market that powers large models but benefits from expansion across the surrounding ecosystem. A data center also requires central processors, networking, specialized chips, advanced packaging, and infrastructure components, so rising cloud investment expands demand for these products.

Revenue from the personal computing and physical AI division increased 13% to $8.9 billion. Intel is integrating AI capabilities into computers, industrial systems, and robotics, with more than 130 customers testing or using its new processors for edge applications and robots. The central test remains manufacturing, where Intel Foundry revenue jumped 31% to $5.8 billion and the divisions operating loss narrowed to about $2.1 billion from about $3.2 billion in the comparable period. A large portion of the revenue comes from manufacturing for Intel internal divisions, leaving investors waiting for major orders from external customers.

The company is advancing the Intel 18A process, which is intended to return it to the front line of chip manufacturers. An advanced version of the process is entering trial production, while high volume production is beginning for some Panther Lake processors. Fortinet is joining as an external customer for production of a security chip, a positive development that provides initial evidence of Intel ability to attract companies from outside the group. Lip Bu Tan, appointed Intel chief executive in March 2025, is reducing management layers, demanding more direct accountability for execution, and aligning investment with actual demand to rebuild manufacturing without creating excess capacity.

Operating cash flow reached $7 billion during the quarter, but adjusted free cash flow was negative by $8.4 billion, partly because of factory investment and cash movements related to partners. Intel plans to increase investment in equipment, clean rooms, and manufacturing materials to meet expected demand in 2026 and 2027. The move strengthens supply capacity but also requires significant cash resources, keeping capital demands central to positioning implications.

Third quarter guidance reinforced the rise in the stock, with Intel forecasting revenue of $15.8 billion to $16.8 billion and a midpoint of $16.3 billion, compared with the market forecast of about $15.1 billion. Adjusted earnings are expected to reach $0.38 per share, above estimates of about $0.27. The stock has already gained more than 170% since the beginning of 2026, leaving expectations high and increasing sensitivity to execution, institutional flows, and possible multiple expansion. Intel recovery against Nvidia and Asian chip manufacturers now depends on continued server processor demand, narrower factory losses, and major external customers for advanced manufacturing processes, with the current quarter showing progress on all three factors.

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