Intel Beats on AI Strength, but Foundry Losses and Rising Capex Drag Shares

Transcript intelligence

What changed

Revenue accelerated from $13.6B in Q1 to $16.1B in Q2, the seventh consecutive quarter of outperformance. AI's contribution to revenue reached 70%. Capex outlook shifted from stable to increasing, with 2026 guidance raised above $20B. Intel Foundry external revenue reached $293M but the operating loss widened to $2.1B. The ASIC design-services business scaled from a $1B+ run rate to approaching $2B with a $4B target. Guidance sentiment moved from raised in Q1 to maintained in Q2. Management flagged a flat PC outlook for the second half due to memory price pressures, a new concern not raised in Q1.

Guidance delta

Intel maintained its overall revenue and EPS outlook, a shift from the raised guidance in Q1. However, capex guidance was raised to more than $20B for 2026, up from a previously stable outlook, driven by tooling investments, EMIB-T advanced packaging capacity, and U.S. fab build-outs. The second-half PC outlook was flagged as flat versus the strong 15% sequential growth seen in Q2.

Key takeaways

• Q2 revenue of $16.1B beat consensus of $14.4B by 11.7%, marking the seventh consecutive quarter of outperformance.
• AI-related demand now drives 70% of revenue, with record Xeon 6 server CPU growth and data-center unit demand expected to remain double-digit.
• Intel Foundry generated $293M in external revenue but posted a $2.1B operating loss, underscoring the early stage of external customer development.
• Capex for 2026 was raised to over $20B, reflecting heavy investment in tooling, advanced packaging, and U.S. manufacturing capacity.
• Client PC revenue rose 15% sequentially, but management indicated a flat second-half outlook due to memory price inflation.
• Foundry roadmap advanced: 18A volume up ~25% above target, 18A-P risk production underway, and 14A risk production targeted for H2 2027 with high-volume ramp in 2028.

Management priorities

• Ramp 18A-P risk production within the year and prepare 14A risk production for H2 2027 with high-volume ramp in 2028.
• Expand EMIB-T advanced packaging into high-volume production for AI workloads.
• Grow ASIC design-services business toward a $4B run-rate target from the current ~$2B.
• Increase tooling investments across Intel 3, 18A, and future nodes to address supply constraints.
• Deepen collaborations with Google Cloud, SambaNova, Fortinet, and Foxconn.