Intel’s turnaround under CEO Lip-Bu Tan is gaining steam with another strong quarter
Shares of Intel rose after the chipmaker reported strong quarterly results and gave an upbeat third-quarter outlook. We expect more gains to come under the guidance of CEO Lip-Bu Tan. Revenue in the second quarter rose 25% year over year to $16.1 billion, beating the LSEG consensus estimate of $14.42 billion. Non-GAAP earnings per share (EPS) rose to a profit of 42 cents from a 10 percent loss one year ago, beating the LSEG estimate of 21 cents. Intel was up about 4% in after-hours trading, bringing it to about $104 per share. It traded as high as $113 in reaction to the results. INTC 1Y mountain Intel 1-year return Below It’s hard not to be impressed by Lip-Bu Tan, who became CEO in March 2025 and has already changed the company’s culture while turning it from a money-loser to a profitable, growing operation. Along the way, Intel is regaining the trust of investors after years of disappointment. To be fair, part of that success is tied to the incredible demand for AI infrastructure. Customers cannot get enough of their x86 CPUs to run the agent’s AI tasks. The advanced packaging business has become increasingly important in the AI era, connecting multiple microchip systems to function as a single chip. And the innovation business provides a strategic advantage, allowing Intel to produce its own AI CPUs without relying on industry leader Taiwan Semiconductor Manufacturing Company (TSMC). With these headwinds behind and under loyal leadership, Intel exceeded its revenue guidance by $1.8 billion, and doubled its Non-GAAP EPS forecast, reporting $0.42 versus the company’s consensus of $0.20. A bit of a disappointment tonight is that the company didn’t announce any major customers for its launch. Several big names, including Apple, have been rumored to partner with Intel, but no official deals have been announced. We fully expect deals to be announced as Intel demonstrates the power of its manufacturing technology. Another thing to consider is the money spent. Citing strong signals of customer demand, Intel now expects capex to exceed $20 billion by 2026. That’s an increase of about $3 billion from earlier expectations. And through 2027, the company expects capex to grow significantly as the company invests throughout its US network. Capex has become a dirty word among tech investors because the more hyperscalers spend, the more their shares fall due to uncertainty about the return on those investments. Building a fabric can be expensive, but this is a smart investment because the demand is there and customers will want their chips made in the US to reduce their country risk. Intel’s core is a logical winner for those who can’t get enough of Taiwan Semiconductor’s offerings. Based on the strength of the quarter and the positive outlook for the future, we reiterate our 1 rating and $140 price target. Why we own it Intel is benefiting from the AI boom in several ways: Its data center CPUs are needed to support AI-driven tasks, while its innovation business allows the company to make its own processors, as well as chips designed by other companies. Competitors : Taiwan Semiconductor , AMD , Arm Holdings Most recent purchase : July 13, 2026 Launched : June 3, 2026 Comment The client computing segment and portable AI segment delivered strong results despite the softening of the PC market. The company said PC AI revenue improved 26% sequentially and edge deployments (the computer closest to where data is created) now make up about 10% of the segment’s revenue. Higher average selling prices helped increase sales, not only from sales to high-end customers but also to pass on some of the price increases to the end customer. The company’s data center and AI segment was a strong performer, with revenue up $2.3 billion year over year and operating income up $1.8 billion due to strong demand from hyperscalers and enterprise customers. Since industry supply cannot keep up with demand in the agent AI era, Intel has also been able to raise CPU prices to boost profits. And, as customers scramble to lock in and hedge against rising prices, they’re rushing 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 reluctant to put numbers around the $220 billion CPU market forecast by 2030 that AMD provided Thursday at its investor event. However, administrators pointed to the ratio of CPUs and GPUs in AI server racks. As we have explained several times, CPUs are better equipped to handle agent tasks compared to GPUs. The rise of the agent AI era has pushed the ratio of CPUs to GPUs from 1 to 8 during the early stages of the AI era to something closer to 1 to 4. Today, Intel believes that the ratio is almost equal (1 to 1), and they expect the ratio to be even more skewed for CPUs in the future. The business founded by Intel, which primarily manufactures Intel chips, has continued to thrive. The unit had been a mess, struggling to meet the profitability and reliability that customers demanded. But it found its stride under Tan’s operational and technical leadership. Revenue increased 31% year over year, while losses fell for the second consecutive quarter as yield improvements and faster cycle times boosted supply above management’s internal targets. Looking ahead, Intel’s most advanced manufacturing process, called 14A, is expected to enter the production of random internal products in the second half of 2027, and from then Tan will decide whether to enter high-volume production in 2028. Outlook Turning to guidance, Intel expects revenue in the range of $15.8 billion to $16.8 billion. The midpoint of $16.3 billion is a healthy forecast compared to the consensus estimate of $15.1 billion. Moving down the line, the company expects GAAP gross margins of 41.0% and Non-GAAP gross margins of 42.0%, representing a 2-point improvement from last year. Both of these are stronger than the Non-GAAP consensus ratio of 40.5%. In fact, Non-GAAP earnings per share were forecast to be 38 cents, a big beat compared to the analyst consensus 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.) As a subscriber 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 trade alert before buying or selling stock in his charity portfolio. 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