Intel’s (NASDAQ:INTC) turnaround gathered momentum in the second quarter, with revenue and profits comfortably beating Wall Street forecasts and AI-related data-centre demand emerging as a powerful growth engine. There is definitely positive operational momentum, but a more demanding valuation.
Revenue jumped 25% year-on-year to $16.1 billion, versus market expectations of roughly $14.4 billion. Adjusted earnings of $0.42 per share were around double consensus forecasts, while adjusted gross margin recovered to 41.8%.
| Intel (NASDAQ:INTC) | Price: $100.23 (+4.1% after-hours) | Market cap: $524.4bn |
Most strikingly, Data Center and AI (DCAI) revenue surged 59% to $6.3 billion.
| Q2 2026 | Reported | Approx. forecast | YoY |
| Revenue | $16.1bn | ~$14.4bn | +25% |
| Adjusted EPS | $0.42 | ~$0.21–$0.22 | Improved from loss |
| Adjusted gross margin | 41.8% | ~39% | +12.1ppt |
| Data Center & AI revenue | $6.3bn | — | +59% |
| Client/Physical AI revenue | $8.9bn | — | +13% |
The scale of the beat matters. Intel had guided for quarterly revenue of $13.8 billion to $14.8 billion, meaning sales exceeded even the top of its own range by around $1.3 billion.
Investors responded positively, sending Intel shares sharply higher in after-hours trading.
AI is becoming a real growth driver
Intel remains far behind Nvidia in AI accelerators, but it does not need to beat Nvidia to benefit from booming AI infrastructure spending.
AI servers still require conventional CPUs to manage workloads, operating systems and data around GPUs and other accelerators. That is supporting demand for Intel’s Xeon server processors.
The 59% increase in DCAI revenue is therefore arguably the most important number in the results.
Intel is also targeting a wider AI opportunity spanning CPUs, custom chips, advanced packaging and semiconductor manufacturing.
Meanwhile, its core PC-related Client and Physical AI business grew 13% to $8.9 billion, helped by the emerging AI PC upgrade cycle.
Guidance suggests momentum can continue
Intel expects third-quarter revenue of $15.8 billion to $16.8 billion, putting the midpoint at $16.3 billion.
Adjusted gross margin is forecast at approximately 42%, with adjusted EPS of around $0.38.
That combination of sustained revenue growth and improving profitability is critical. Semiconductor manufacturing has enormous fixed costs, meaning higher factory utilisation and better manufacturing yields can generate powerful operating leverage.
Foundry could transform Intel – if it works
Intel’s biggest long-term opportunity may be its attempt to become a major contract chip manufacturer competing with TSMC and Samsung.
TSMC dominates advanced semiconductor manufacturing, with around three-quarters of the global pure-play foundry market. Intel, however, possesses something strategically valuable: advanced manufacturing capacity primarily located in the US and Europe.
TSMC AI boom powers another blockbuster quarter – but can it keep beating sky-high expectations?
Its 18A manufacturing technology is central to the turnaround.
Panther Lake processors are moving into high-volume manufacturing, while Intel has also introduced server products using 18A technology.
If Intel proves that 18A and subsequent processes can deliver competitive performance, yields and economics, it could attract major external customers looking to diversify semiconductor production away from Asia.
But investors should distinguish between technological progress and commercial success. TSMC has decades of experience manufacturing chips for competing customers at enormous scale.
Intel still has to prove it can replicate that model profitably.
How does Intel compare with global rivals?
| Company | Core strength | AI position | Investment attraction |
| Nvidia | AI accelerators | Dominant | AI compute leadership |
| TSMC | Chip manufacturing | Very strong | Foundry dominance |
| AMD | CPUs/GPUs | Strong | Share gains + AI |
| Intel | CPUs + foundry | Rapidly improving | Turnaround + Western fabs |
| Broadcom | Networking/custom chips | Very strong | AI infrastructure |
| Samsung | Memory + foundry | Strong | Diversified chip exposure |
Intel’s unusual strategy effectively asks it to be both AMD and TSMC: designing competitive processors while operating leading-edge factories for itself and potentially external customers.
That creates significant upside – but also exceptional execution risk.
Valuation: no longer an obvious bargain
This is the biggest change in Intel’s investment case.
Following its spectacular 2026 rally, Intel can no longer simply be viewed as a cheap turnaround stock. Its valuation increasingly reflects expectations that the recovery will succeed.
Investors are effectively paying today for several future outcomes: continued AI-driven CPU growth, higher margins, successful 18A manufacturing and meaningful external foundry customers.
That contrasts with TSMC, which already possesses dominant foundry market share and far stronger manufacturing economics.
Intel could justify a premium if profits rebound sharply, but the higher valuation also means disappointing results could trigger greater share-price volatility.
Bull case
AI demand: Xeon benefits from massive AI data-centre investment.
Margin recovery: Better yields and factory utilisation drive powerful earnings growth.
18A succeeds: Intel establishes credible leading-edge manufacturing.
Foundry breakthrough: Major external customers turn Intel into a strategic Western alternative to TSMC.
Geopolitical advantage: Governments and customers increasingly value US and European semiconductor capacity.
Bear case
Valuation: Much of the turnaround may already be reflected in the share price.
Competition: AMD, Nvidia, Arm and custom hyperscaler chips pressure Intel across multiple markets.
Foundry risk: Intel struggles to attract enough external customers to justify huge investment.
Execution: Manufacturing delays or poor yields derail margin recovery.
AI concentration: Spending remains dominated by GPUs and custom accelerators rather than Intel CPUs.
Investor verdict
Q2 significantly strengthens Intel’s turnaround story.
25% revenue growth, 59% DCAI growth and rapidly recovering margins suggest this is becoming more than a cost-cutting recovery. Intel could emerge as an important AI infrastructure player spanning CPUs, custom silicon, advanced packaging and Western semiconductor manufacturing.
The problem is that expectations have risen alongside the share price.
For UK investors, Nvidia still offers clearer exposure to AI accelerator leadership, while TSMC offers dominant foundry economics. Intel is the more speculative proposition: a leveraged bet on the revival of a former semiconductor leader and the creation of a strategically important Western foundry competitor.
The upside remains substantial if 18A succeeds and margins recover further. But after Intel’s dramatic re-rating, the margin for execution errors has narrowed.
Sharesify view: Positive operational momentum, but a more demanding valuation means future share price gains will increasingly depend on Intel delivering – not merely promising – its turnaround.
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