Intel’s Turnaround Accelerates Under CEO Lip-Bu Tan as Strong Quarter Fuels Optimism

Intel shares climbed roughly 4% in after-hours trading following the release of robust second-quarter results and an optimistic third-quarter forecast, reinforcing confidence in CEO Lip-Bu Tan’s leadership since he took the helm in March 2025.

Revenue surged 25% year over year to $16.1 billion, comfortably exceeding the $14.42 billion consensus estimate. Non-GAAP earnings per share swung to a 42-cent profit from a 10-cent loss a year earlier, surpassing the 21-cent expectation. The stock reached approximately $104 in extended trading after touching highs near $113.

Since assuming the top role, Tan has reshaped Intel’s culture and pivoted the company from a loss-making operation to a profitable, growing enterprise, restoring investor trust after years of setbacks. While surging demand for AI infrastructure has provided a significant tailwind, Tan’s disciplined execution has been pivotal. Intel surpassed its own revenue guidance by $1.8 billion and more than doubled its Non-GAAP EPS forecast.

Key growth drivers include robust demand for x86 CPUs to power agentic AI workloads, a strategically vital advanced packaging business that links multiple chips into a single system, and a foundry operation that insulates Intel from reliance on Taiwan Semiconductor Manufacturing Company (TSMC) for its own AI processors.

One notable omission was the absence of major foundry customer announcements, despite persistent rumors involving companies such as Apple. However, as Intel demonstrates the maturity of its manufacturing technology, formal partnerships are widely anticipated.

Capital expenditure plans are rising, with 2026 capex now projected above $20 billion — a $3 billion increase from prior guidance — and significant further investment expected in 2027 across Intel’s U.S. fab network. While heavy spending has pressured hyperscaler stocks recently, Intel’s outlays are viewed as strategic investments to meet documented demand and reduce geopolitical supply-chain risk for customers seeking alternatives to Taiwan-based production.

Segment performance underscored the breadth of the recovery. The Client Computing and Physical AI group posted strong results despite a softening PC market, with AI PC revenue climbing 26% sequentially and edge deployments now comprising roughly 10% of segment sales. Higher average selling prices, driven by premium mix and cost pass-through, bolstered revenue.

The Data Center and AI segment was the standout, with revenue jumping $2.3 billion year over year and operating income surging $1.8 billion on hyperscaler and enterprise demand. Tight industry supply has enabled CPU price increases, while customers are locking in long-term supply agreements to hedge against future cost escalation — a dynamic also observed at peers such as Micron and Sandisk.

Regarding the total addressable market, Intel declined to endorse AMD’s $220 billion CPU market forecast for 2030 but highlighted a shifting CPU-to-GPU ratio in AI server racks. As agentic AI workloads favor CPUs, the ratio has moved from 1:8 in early AI deployments toward parity today, with expectations it will skew further toward CPUs.

The foundry business, once plagued by yield and reliability issues, has found its footing under Tan. Revenue rose 31% year over year, and losses narrowed for a second consecutive quarter as improved yields and faster cycle times pushed supply above internal targets. Intel’s 14A process node is on track for risk production on internal products in the second half of 2027, with a high-volume production decision for 2028 pending.

For the third quarter, Intel guided revenue of $15.8 billion to $16.8 billion, with a $16.3 billion midpoint well above the $15.1 billion consensus. Non-GAAP gross margin is expected to reach 42%, up two percentage points year over year and ahead of the 40.5% estimate. Non-GAAP EPS is forecast at 38 cents, significantly above the 27-cent consensus and the 23 cents earned in the year-ago quarter.

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