Intel’s AI Bet Finally Pays Off as Earnings Beat Expectations

Intel has just delivered to investors the quarter they’ve been waiting for, for years. The chipmaker on July 23 delivered a profit and revenues beat that sent the market reeling on the spot. The gains were as high as 10 per cent in after hours trading but ended in a solid single digit rise.

Intel’s revenue forecast for the third quarter of $15.8 billion to $16.8 billion is well above the $15.1 billion range analysts projected, according to data compiled by LSEG. The adjusted profit is expected at 38 cents per share, up from 27 cents projected by analysts. It’s a welcome change of pace for a company that during the bulk of the last two years has been attempting to spin its failures of meeting targets and a tattered stock price.

What’s Driving the Turnaround

The answer is: AI, but not as most people would think. This is not a case of Intel unexpectedly going the extra mile to beat Nvidia over the head in the GPU game. It’s about the mundane and unsexy hardware that lies beneath the AI hype: CPUs in the server.

The rise of what’s called agentic AI or autonomous software agents that perform actions such as coding on a user’s behalf has proved to be a very positive trend for Intel as it has seen a significant uptick in demand for data center processors. For these AI agents to scale to meet data centers requirements, they require traditional compute power in addition to special AI silicon, with Intel delivering a lot of the former. CEO Gordon Moore previously said that the backlog of orders was surging, but that its factories were simply unable to keep up. In fact, company leadership has previously admitted that the increase in orders was greater than what its factories could produce, a good problem that Intel has rarely faced in recent memory.

Intel is investing real capital in it in order to stay current. But Intel said in a statement to Reuters that the surge in demand led the company to increase its capital expenditures forecast for 2026 to $20 billion from $18 billion, and it expects to continue spending. Zinsner said capex will be “up meaningfully next year” as well, as that’s “an indicator of confidence” on the business’s growth prospects.

On the customer side, Zinsner said Intel had extended long term deals totaling three to five years in duration for both data center CPUs and special AI chips called XPUs, some with a fixed price and volume and others just with volume. He was cautious but stated that “long-term deals aren’t guaranteed”, but can be renegotiated if something changes. It’s a direct admission that indicates that Intel is attempting to control optimism rather than overpromise as it has done in the past.

A Stock That’s Already Had a Wild Year

Context matters here. With Intel’s stock falling from over 25% past its record close on June 22 in a wider semiconductor stock sell off, part of the news here is as much a boost to investor confidence as it is a reflection of the numbers. The stock is still more than 170% higher than last year and that retreat is still more than double the year-over-year gain.

This momentum was not created out of thin air. Intel’s turnaround has been a long time coming, with CEO Lip-Bu Tan stepping in and beginning to reorganize the company’s chip manufacturing and management structure. Big name support has been a factor too, along with a $5 billion investment from Nvidia and a $2 billion investment from SoftBank, the U.S. government also had a stake in strengthening Intel’s balance sheet, which in turn provided Tan with more flexibility to reformulate the manufacturing and AI strategy.

Analysts are taking notice. If Intel is able to successfully convert what is obviously a data center crisis into a steady flow of new revenue, improve foundry economics, and more importantly, snag any external customers to begin to validate the next stage in its manufacturing turnaround, the stock could continue to revalue higher, said Futurum Group chief market strategist Shay Boloor. The truth will be in the teeth of that latter at Intel’s foundry, where the unit will manufacture chips for customers outside the company, at least in the long run, and will face competition from other companies, such as Taiwan Semiconductor Manufacturing Company.

Why This Matters Beyond Wall Street

This earnings triumph isn’t a mere stock market tale for the everyday tech buyer and gadget fan. Intel’s need for stronger CPU power and higher prices in the data center market can easily spread through to the consumer and enterprise hardware that it sells to the rest of the world, including other laptop, workstation and cloud based chipsets that other gadgets and apps rely on without you even realizing. It’s usually a positive development for the CPU market and everything that comes before and after that when Intel is financially sound enough that it can invest more in R&D and manufacturing.

It’s also a sign of a larger trend we’ve been monitoring: The AI boom is not solely the GPU’s. The technology required to power AI, the servers, the CPUs, the cooling, the power is emerging as a significant and fast growing battleground, and Intel got a taste of its own medicine in its Q2 results, which showed that it’s starting to take center stage in the battle.

TheTweaks Verdict

Intel’s turnaround story has been plagued by false starts so far, so there’s reason to take the hype with a grain of salt. This quarter is different, it was not only a revenue beat, it was a spending commitment and multi year customer contracts to support it. The foundry business must still demonstrate itself to outside marquees, and the stock itself has been volatile so far this year, indicating that the market remains somewhat uncertain. Let’s say that you aren’t keeping a close eye on the AI hardware news story other than Nvidia‘s GPUs, Intel’s got a solid argument for reentering the discussion. We’re a bit hesitant to be hopeful but we’ll be paying close attention to Q3 to see if the momentum continues.