Intel forecast crushes estimates as AI boom boosts chip demand; shares jump
It will raise its capital expenditure forecast for this year from US$18 billion to US$20 billion
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INTEL forecast quarterly profit and revenue above estimates on Thursday (Jul 23), pushing its shares up 10 per cent in after-hours trade, and boosted spending plans over the next two years as an AI data centre buildout increases demand for its central processing units (CPUs).
The company expects third-quarter revenue between US$15.8 billion and US$16.8 billion, compared with analysts’ average estimate of US$15.1 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 benefiting 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 per cent from a record close on Jun 22 amid a broader selloff in chip stocks, though shares remain up more than 170 per cent for the year.
The results vindicate CEO Lip-Bu Tan’s costly strategy to regain technology leadership and compete with rivals like Nvidia and AMD in the booming market for AI chips.
Investors are closely watching Intel‘s data centre and contract manufacturing, or foundry, businesses as key indicators of the turnaround’s success.
On a conference call with analysts on Thursday, Tan said developments during the second quarter prompted Intel to become “fully committed” to high-volume production of chips made with its forthcoming 14A manufacturing technology in 2028.
Last year, Intel had warned it might be forced to abandon development of 14A technology if it could not find a major customer, which would have effectively put the US out of the race to make the world’s fastest chips.
“I’m pleased to see the increasing momentum on customer engagements for Intel 14A, and I’m increasingly confident that the 14A will be highly competitive process,” Tan said.
For the second quarter ended Jun 27, Intel said sales rose 25.4 per cent to US$16.13 billion and adjusted profit was 42 cents per share, compared with estimates of US$14.42 billion and 21 cents per share. Adjusted gross margin came in at 41.8 per cent, compared with estimates of 38.8 per cent.
Agentic AI drives CPU demand surge
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.
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 US$18 billion to US$20 billion. Zinsner also said Intel expects capital expenditures to be “up meaningfully next year” as well.
“That’s signaling the confidence around the growth opportunities for the business,” Zinsner said.
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.”
Zinsner said Intel has about US$30 billion in cash and a US$10 billion line of credit but that a share sale, while currently not authorised, is not out of the question.
“I wouldn’t dismiss the possibility that we would do that. But no specific plans at this point,” he said.
For Intel’s data centre and AI business, Intel said second-quarter revenue was US$6.26 billion, compared with estimates of US$5.37 billion.
Also in extended trade, rival chipmakers Arm Holdings and Advanced Micro Devices rallied more than 3 per cent each, and along with Intel they created over US$100 billion in stock market value.
Intel said sales in its laptop and desktop segment were US$8.88 billion in the second quarter, compared with estimates of US$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.
Contract manufacturing gains traction
Intel’s foundry business had US$5.77 billion in second-quarter sales, compared with analyst estimates of us$5.55 billion. 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 US President Donald Trump announced that Apple had agreed to make processors with Intel. Neither company has confirmed the deal.
“There have been lingering questions ever since Lip-Bu Tan took over, and it put a cloud of uncertainty around the foundry business,” said Bob O’Donnell, CEO of TECHnalysis Research. “All those clouds are now removed.” REUTERS
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