Intel Corporation (INTC) | The Buildout — AI Infrastructure
The Verdict
Intel is a U.S.-based integrated design manufacturer that designs, manufactures, markets, sells, and services CPUs and other semiconductors, while developing leading-edge process nodes and advanced packaging. Its x86 server CPUs sit in the compute layer of AI infrastructure, and its foundry and packaging businesses target the leading-edge wafer and packaging portion of the buildout.
| Market Cap | — |
| Revenue (TTM) | $57.0B |
| Revenue Growth | +7.5% |
| EBITDA Margin (TTM) | 21.8% |
| Net Debt | $20.8B |
| Earnings Beats | 5 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- DCAI revenue reached $6.3B in Q2 FY2026, up 59% YoY, with operating profit of $2.5B and a 40% operating margin.
- Management says collective AI-driven businesses grew greater than 70% YoY and contributed approximately 70% of revenue.
- Intel 18A output ran about 25% above target and rose more than 50% QoQ, while the primary Panther Lake SKU cost fell roughly 50% year-to-date.
- Advanced packaging demand is now seen as more in the billions of dollars per year kind of level, not the hundreds of millions originally expected.
- Purpose-built silicon is approaching a $2B run rate, with management describing a path to a $4B run rate in the not-too-distant future.
What We’re Watching
- External foundry revenue remains small at $293M in Q2 FY2026, up from $174M in Q1.
- No named external 14A design commitments have been disclosed; the 10-Q pause-or-discontinue language for 14A is still relevant until 2H 2026–1H 2027 commitments arrive.
- 18A products remain below corporate-average gross margin, and Q3 non-GAAP gross margin is guided to 42% at midpoint.
- PC unit TAM is expected down low double digits in 2026 with Q4 client soft; higher capex and the equity offering raise funding risk.
The thesis is strengthening based on disclosed data-center demand, AI-driven revenue, and 18A execution, but it is not fully de-risked. The central open question is whether external 14A design commitments and external foundry revenue scale in 2H 2026–1H 2027.
Earnings Beat
Intel reported Q2 FY2026 revenue of $16.1B, about $1.8B above the midpoint of guidance, with non-GAAP gross margin of 41.8% and non-GAAP EPS of $0.42 versus guidance of $0.20. Management called it the seventh consecutive quarter of exceeding financial expectations, and Q2 operating cash flow was $7B.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $16.1B | $13.6B | $12.9B | +25.4% |
| Gross margin | 41.5% | 39.4% | 27.5% | +1400bps |
| EBITDA | $5.2B | $0M | −$163M | −3293.3% |
| EPS | $-2.16 | $-0.73 | $-0.67 | +223.7% |
| External foundry revenue | $293M | $174M | n/a | — |
| AI-driven revenue share | ~70% of revenue | ~60% of revenue | n/a | — |
Today, we are seeing the strongest revenue growth in more than 15 years… Industry is facing one of the most severe supply constraints in its history across leading-edge logic silicon wafers, memory and [substrates]. These shortages will persist for the foreseeable future.— Lip-Bu Tan, Chief Executive Officer, 2026-07-23
Management tone: Management shifted from turnaround survival language in Q1 FY2026 to capacity-scarcity language in Q2, pointing to supply constraints and raised capex. Executives were candid about being behind demand in Q4 and said capital markets could be needed if growth is 'super successful.'
Management Guidance
For Q3 FY2026, Intel guided revenue of $15.8B to $16.8B with a midpoint of $16.3B, non-GAAP gross margin of 42% at midpoint, non-GAAP EPS of $0.38, and a tax rate of 11%. For FY2026, management raised capex to more than $20B, set non-GAAP OpEx at roughly $16.5B, and reaffirmed PC unit TAM down low double digits.
Trajectory
Revenue was $13,653M in Q3 FY2025, ticked up 0.2% QoQ to $13,674M in Q4 FY2025, then declined 0.7% sequentially to $13,577M in Q1 FY2026 before rising 18.8% QoQ to $16,128M in Q2 FY2026. Non-GAAP gross margin improved from 41.0% in Q1 FY2026 to 41.8% in Q2, while DCAI revenue grew 59% YoY to $6.3B and Intel Foundry's operating loss narrowed by $348M sequentially. The computed trajectory is still marked decelerating over the longer series, but the latest quarter reversed the near-term trend.
The Model
The model projects FY+1 revenue of $57,800M and EBITDA of $17,513M, a 30.3% EBITDA margin, and FY+2 revenue of $65,500M with EBITDA of $22,204M, a 33.9% margin. The near-term projection is anchored by data-center demand and capacity additions; the FY+2 step-up depends on advanced packaging and foundry revenue converting toward the disclosed 2027 ramp.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $52.9B | $63.7B | $76.2B |
| YoY Growth | — | +20.5% | +19.6% |
| EBITDA | $9.5B | $20.8B | $26.9B |
| EBITDA Margin | 17.9% | 32.6% | 35.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 16.4% above analyst consensus.
For Q3 FY2026, Intel guided revenue of $15.8B to $16.8B with a midpoint of $16.3B, non-GAAP gross margin of 42% at midpoint, non-GAAP EPS of $0.38, and a tax rate of 11%. For FY2026, management raised capex to more than $20B, set non-GAAP OpEx at roughly $16.5B, and reaffirmed PC unit TAM down low double digits.
What Could Go Right — and Wrong
- External 14A design commitments are publicly disclosed in 2H 2026 through 1H 2027.
- External foundry revenue scales beyond the Q2 FY2026 level of $293M.
- EMIB-T advanced packaging backlog converts to revenue in 2027 at the billions-per-year demand level management described.
- 18A products move above corporate-average gross margin as yield and cost-down improve.
- Server CPU industry unit growth stays strong double-digit through 2028 and Intel holds share against AMD and Arm.
- No external 14A design commitments arrive, and the 10-Q pause-or-discontinue language becomes the active scenario.
- 18A margin dilution persists as new products remain below corporate-average gross margin.
- PC unit TAM declines worse than the guided low double digits and Q4 client softness deepens.
- Aggressive capex and the $20B common-stock offering strain cash generation if revenue payback lags.
- Memory, substrate, and T-glass input-cost inflation outruns pricing.
Looking Ahead
The next 12 months are built around Intel's process and packaging proof points. Management expects 14A external design commitments to begin in 2H 2026 and expand into 1H 2027, with 14A PDK 0.9 due in October 2026 and 18A-P ready for external customers before the end of 2026. EMIB-T customer ramps and a formal 2027 capex number are also scheduled for 2027.
- October 202614A PDK 0.9 release — Tests customer reaction ahead of external design commitments.
- 2H 2026–1H 2027External 14A design commitments — Central foundry proof point; none named yet.
- Before end 202618A-P ready — Tests adoption after Q2 risk production.
- Q4 FY2026Server supply improvement — Tests late-Q3 capacity lift while demand remains ahead of supply.
- 2027EMIB-T customer ramps — Tests advanced packaging backlog converting to revenue.
- Early 20272027 capex number — Tests funding plan for capex significantly above 2026.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $53.1B | $52.9B | $57.0B | -0.5% |
| Gross Margin | 32.6% | 34.7% | 38.9% | +202bps |
| EBITDA | −$299M | $9.5B | $213.4B | +3264.5% |
| EBITDA Margin | -0.6% | 17.9% | 21.8% | +1,847bps |
| Net Income | −$18.8B | −$267M | −$11.3B | +98.6% |
| Free Cash Flow | −$15.7B | −$4.9B | $37.4B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)38.9%
- EBITDA Margin (TTM)21.8%
- Net Margin (TTM)-19.8%
- ROIC0.1%
- FCF Conversion22.7%
- SBC / Revenue4.2%
The Company
Intel is a U.S.-based integrated design manufacturer that designs, manufactures, markets, sells, and services CPUs and other semiconductor products. Its Xeon server CPUs are foundational compute for data center, cloud, networking, and intelligent edge deployments, while its client business spans AI PCs, edge, and connectivity, and Intel Foundry develops leading-edge process nodes and advanced packaging.
Most manufacturing and assembly/test occurs in Intel's own facilities, many in the U.S. The 10-K names Oregon, Arizona, Ireland, Israel, China, New Mexico, Vietnam, Malaysia, and Ohio as manufacturing sites; Oregon and Arizona are ramping Intel 18A, New Mexico is a key advanced packaging facility, and Malaysia is building a new advanced packaging facility.
Business Segments
Competitive Landscape
The 10-K segments competition: AMD is the primary x86 competitor in client computing; NVIDIA GPU systems have experienced the highest demand for AI workloads; Broadcom is a disclosed competitor in custom ASICs; TSMC and Samsung compete in leading-edge foundry. Hyperscalers such as Amazon, Google, Meta, and Microsoft are developing their own custom silicon, which competes with merchant CPUs but can flow to Intel's ASIC, design-services, and foundry businesses.
- AMDPrimary x86 competitor; Intel's CEO acknowledges Intel is still behind in some areas.
- NVIDIACustomer and competitor; Xeon 6 is host CPU for NVIDIA DGX Rubin NVL8 systems.
- BroadcomDisclosed competitor in custom ASIC development market.
- TSMCSupplier and primary leading-edge foundry competitor; Intel uses TSMC where advantageous.
- ArmCompetitor in server/CPU designs; Intel's CEO calls Arm 'a great partner.'
Supply Chain
Intel sits between sole-source EUV supplier ASML and top customers that were 43% of net revenue in 2025, with TSMC as both a supplier and leading-edge foundry competitor. Neighbor calls from HPE, Supermicro, and Google describe constrained downstream compute supply.
More on INTC: Earnings recap