Intel’s second-quarter results landed like a cold compress on a sector that spent July convincing itself the AI trade was broken. Revenue of $16.1 billion rose 25 percent from a year earlier, the fastest pace since 2011, and cleared the midpoint of guidance by $1.8 billion. Adjusted earnings of 42 cents a share doubled the consensus estimate. The stock leapt as much as 13 percent after hours, briefly kissing $112. For a semiconductor index that had shed nearly $2 trillion in market value since its June peak, the report offered the first hard evidence that the selloff was a multiple reset, not a demand collapse.
Data Center Strength Is Real
The clearest signal came from the Data Center and AI Group, where revenue surged 59 percent to $6.3 billion. Management said AI-linked businesses grew more than 70 percent and now account for roughly 70 percent of total revenue. CFO David Zinsner told analysts that server CPU demand has improved since last quarter and cited double-digit industry unit growth projected through 2028. Intel also disclosed ten long-term supply agreements, some locking in pricing, others purely securing volume. The bear case for July centered on hyperscalers pulling back capital spending. Intel’s numbers argue the bottleneck is hardware supply, substrates and memory shortages expected to persist into next year, not fading appetite.
Foundry Progress Still Internal
Margin recovery is the other pillar of the bull case, and it is real. Non-GAAP gross margin expanded to 41.8 percent from 29.7 percent a year ago, driven by scale, a richer product mix, and disciplined pricing. Foundry revenue rose 31 percent to $5.8 billion, and 18A wafer output jumped more than 50 percent quarter over quarter with yields ahead of internal targets. But external Foundry revenue was just $293 million, about 5 percent of the segment. The operating loss narrowed to roughly $2.1 billion but remains substantial. Fortinet joined as a named customer this week, though on an older node, not the leading-edge 18A or 14A processes investors need validated. Until a marquee customer commits real volume to those nodes, Foundry remains a story of internal progress, not proven outside demand.
Guidance Signals Confidence
Intel guided third-quarter revenue to $15.8-16.8 billion and adjusted EPS to 38 cents, both well above Wall Street’s $15.1 billion and 27 cents. Management also raised its 2026 capital expenditure outlook from $18 billion to more than $20 billion, with 2027 spending set to climb further. This marks the seventh straight quarter of beating its own outlook, a pattern that suggests a management team that has recalibrated expectations lower than what it can actually deliver. The question now is whether the market rewards the beat or continues to price for a Foundry business that still burns cash faster than it earns revenue.