Intel forecast quarterly profit and revenue above estimates on Thursday, boosting its spending plans over the next two years as an AI data centre buildout increases demand for its central processing units (CPUs). Shares of Intel, which closed down 2.3% on Thursday, rose over 8% in after-hours trading.
Market Context
The shift toward AI agents has driven a resurgence of demand for data centre CPUs, with Intel’s leaders saying earlier this year that it caught them off guard, with demand outstripping the company’s ability to manufacture the CPU chips.
“That’s signaling the confidence around the growth opportunities for the business,” Zinsner said.
Nvidia, which dominates the AI accelerator market, is also making a rare move into the CPU space with its “Vera” processor, while Big Tech firms such as Amazon and Alphabet continue to develop their own in-house, Arm-based CPUs.
Company Performance
He also said that Intel has signed a range of long-term agreements with customers for data centre CPUs and specialised chips called XPUs. He said the agreements range from three to five years and that some contain both chip volume and price commitments and some contain only volume commitments. But Zinsner also said Intel would remain disciplined about spending.
“You can’t completely hang your hat on (long-term agreements) because when things change, a lot of times things get renegotiated,” he said. However, “they’re not signing those unless they have real confidence around what they’re going to invest.” He added: “It gives us a pretty good confidence around what we should be planning in terms of output.”
Intel said sales in its laptop and desktop segment were $8.88 billion in the second quarter, compared with estimates of $7.89 billion. Zinsner said that in the company’s laptop and desktop business, unit sales were down but average prices were up as Intel shifted away from supplying lower-cost chips for entry-level machines and back to chips for higher-end devices.
A key part of Intel’s revival strategy is its contract manufacturing, or foundry business. Intel’s foundry business had $5.77 billion in second-quarter sales, compared with analyst estimates of $5.55 billion.
Competitor Comparison
For the second quarter ended June 27, Intel said sales rose 25.4% to $16.13 billion and adjusted profit was 42 cents per share, compared with estimates of $14.42 billion and 21 cents per share. Adjusted gross margin came in at 41.8%, compared with estimates of 38.8%.
Zinsner said Intel has about $30 billion in cash and a $10 billion line of credit but that a share sale, while currently not authorised, is not out of the question.
“I wouldn’t miss the possibility that we would do that. But no specific plans at this point,” he said.
Intel CEO Lip-Bu Tan has been leading a turnaround at Santa Clara, California-based Intel, which fell behind as Nvidia’s graphics processors dominated the first phase of the AI boom. For Intel’s data centre and AI business, Intel said second-quarter revenue was $6.26 billion, compared with estimates of $5.37 billion.
Future Forecast
The company expects third-quarter revenue between $15.8 billion and $16.8 billion, compared with analysts’ average estimate of $15.10 billion, according to data compiled by LSEG.
Adjusted profit is expected to be 38 cents per share, compared with analyst estimates of 27 cents. Intel is benefitting from a boom in what is known as agentic AI, where autonomous agents carry out tasks such as computer coding on behalf of human users. Its shares have declined more than 25% from a record close on June 22 amid a broader selloff in chip stocks, though shares remain up more than 170% for the year.
In an interview, Chief Financial Officer David Zinsner told Reuters that booming demand has prompted Intel to raise its capital expenditure forecast for this year from $18 billion to $20 billion. Zinsner also said Intel expects capital expenditures to be “up meaningfully next year” as well.
The unit secured Elon Musk’s Tesla as a customer for its next-generation 14A process for the “Terafab” AI chip project, bolstering confidence in Intel’s efforts to land major buyers. Expectations of another high-profile win rose in April after U.S. President Donald Trump announced that Apple had agreed to make processors with Intel.
Neither company has confirmed the deal.
