Intel Corporation (INTC) | The Buildout — AI Infrastructure
The Verdict
Intel designs and manufactures the CPUs that sit inside PCs and data-center servers, and it runs its own leading-edge fabs and advanced-packaging lines. In the AI buildout its pitch is twofold. First, that the CPU becomes the control point for AI systems as workloads shift toward inference and agentic use — management calls it "the orchestration layer and critical control plane." Second, that Intel can manufacture leading-edge wafers and advanced packaging for other companies' AI silicon. Its own accelerator attempt, Gaudi, was written off as unsuccessful. That leaves a company running a product business and a foundry business at the same time.
| 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 server revenue grew 59% year over year in Q2 2026 to $6.3B; management called it the strongest server growth on record and extended its demand horizon into 2028.
- Management-defined AI-driven businesses reached about 70% of revenue in Q2 2026, up from about 60% in Q1, and grew more than 70% year over year.
- 18A output ran roughly 25% above target and up more than 50% quarter over quarter; 18A-P entered risk production and is positioned for external customers before the end of 2026.
- Purpose-built silicon is approaching a $2B annual run rate with a $4B target, and design-services revenue grew nearly three times year over year.
- Non-GAAP gross margin was 41.8% in Q2, which management describes as comfortably in the 40s, and the company has exceeded guidance in seven consecutive quarters.
What We’re Watching
- Supply still gates revenue. The CFO said Intel "will not catch up. We will be behind in the fourth quarter," citing memory, substrates and T-glass as the most challenged inputs.
- Intel Foundry lost $2.1B in Q2 against external revenue of just $293M, and no external foundry customer has been named.
- 14A is conditional: the 10-Q says Intel may pause or discontinue 14A without committed external demand, while external design commitments are expected to build from H2 2026 into H1 2027.
- PC unit TAM is guided down low double digits for 2026 with H2 consumption "subseasonal"; one supply-chain neighbor sees a steeper high-teens decline.
On execution the thesis is strengthening: revenue is stepping up, data-center CPUs are growing 59% year over year, 18A is running ahead of plan, and the company has beaten guidance seven quarters running. On structure it is unresolved: the foundry still loses money at scale, external revenue is $293M, and the 14A commitment on the call sits next to the 10-Q's language about possibly discontinuing it. The open question is whether Intel names a firm external 14A or advanced-packaging customer inside the H2 2026 to H1 2027 window it has set.
Earnings Beat
Intel reported Q2 2026 revenue of $16.1B, $1.8B above the midpoint of its guidance, with non-GAAP gross margin of 41.8% — about 280 basis points better than guided — and non-GAAP EPS of $0.42 against a $0.20 guide (GAAP gross margin was 41.5%). DCAI was the standout: revenue of $6.3B, up 59% year over year and 24% sequentially, which management called the strongest server growth on record.
| 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% |
| DCAI revenue | $6.3B | $5.1B | n/a | +59% YoY |
| AI-driven businesses | ~70% of revenue | ~60% of revenue | n/a | grew >70% YoY |
Q2 year-over-year server growth was the strongest on record.— Intel CEO, 2026-07-23
Management tone: Management's language escalated through the period. The CPU framing moved from "growing and essential" to "indispensable foundation of the AI era." The clearest change was on capital: the 2026 CapEx plan moved from flat to more than $20B, with 2027 "significantly above." The server-demand horizon was extended from 2027 to 2028. Executives were also candid about the gap, saying Intel would remain behind demand through the fourth quarter.
Management Guidance
For Q3 2026 Intel guides revenue of $15.8B–$16.8B (midpoint $16.3B), non-GAAP gross margin of 42%, a tax rate of 11% and non-GAAP EPS of $0.38. For the year it keeps non-GAAP operating expenses at roughly $16.5B and now expects CapEx of more than $20B, up from a prior flat plan, with 2027 CapEx "significantly above" 2026 and the exact number deferred. Tooling spend is raised to +40% versus 2025. Other stated items: NCI of about $250M in each of Q3 and Q4 2026 and about $1.1B for 2027–2028; PC unit TAM down low double digits for 2026; and strong double-digit server CPU unit growth this year and next, with momentum extending into 2028.
Trajectory
Revenue sat near $13.6B for three quarters, then stepped up 18.8% sequentially to $16.1B in the June 2026 quarter — what management calls the strongest revenue growth in more than 15 years. Gross margin moved from 39.4% to 41.5% on a GAAP basis, and operating and EBITDA margins expanded alongside it. The driver, in management's telling, is demand outrunning supply: data-center revenue grew 59% year over year, and the company says it remains constrained across wafers, memory and substrates.
The Model
The model projects FY+1 revenue of $63.3B and EBITDA of $20,762M, a 32.8% EBITDA margin, and FY+2 revenue of $75.0B with EBITDA of $27,300M, a 36.4% margin. The near term leans on the server-CPU demand Intel says is running ahead of supply and on 18A volumes continuing to ramp. The FY+2 step-up depends on things Intel has pointed to but not yet delivered: 14A reaching high-volume ramp in 2028, advanced-packaging backlog converting to revenue in 2027, and purpose-built silicon advancing toward its $4B run-rate target.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $52.9B | $63.3B | $75.0B |
| YoY Growth | — | +19.8% | +18.5% |
| EBITDA | $9.5B | $20.8B | $27.3B |
| EBITDA Margin | 17.9% | 32.8% | 36.4% |
Projections are the median of 5 independent model runs. The model’s revenue sits 16.4% above analyst consensus.
For Q3 2026 Intel guides revenue of $15.8B–$16.8B (midpoint $16.3B), non-GAAP gross margin of 42%, a tax rate of 11% and non-GAAP EPS of $0.38. For the year it keeps non-GAAP operating expenses at roughly $16.5B and now expects CapEx of more than $20B, up from a prior flat plan, with 2027 CapEx "significantly above" 2026 and the exact number deferred. Tooling spend is raised to +40% versus 2025. Other stated items: NCI of about $250M in each of Q3 and Q4 2026 and about $1.1B for 2027–2028; PC unit TAM down low double digits for 2026; and strong double-digit server CPU unit growth this year and next, with momentum extending into 2028.
What Could Go Right — and Wrong
- Intel names firm external 14A design wins; management expects design commitments to build from H2 2026 into H1 2027.
- Advanced packaging (EMIB-T) backlog converts to revenue in 2027 as management expects, supported by the Malaysia back-end expansion.
- Purpose-built silicon reaches the $4B run-rate target with named customers attached.
- The foundry operating loss keeps narrowing from the $2.1B reported in Q2.
- Supply improves faster than the "behind in the fourth quarter" stance implies, unlocking the deferred Q4 revenue step-up.
- 14A fails the 10-Q's "economical" test, forcing a pause or discontinuation and a shift to an external foundry for nodes beyond 18A-P.
- Foundry losses stay near $2B a quarter while CapEx above $20B and the $20B equity raise weigh on the capital base without a return.
- The PC unit decline is worse than low double digits and input-cost inflation proves non-passable, pressuring gross margin.
- The CapEx step-up converts to cost before it converts to supply and revenue, keeping revenue supply-gated.
- Customer concentration bites: the top three customers were 43% of 2025 revenue and are unnamed.
Looking Ahead
The next twelve months turn on a short list of dated milestones. Q3 2026 results are due with an October update, testing the 42% gross-margin guide. The 14A PDK 0.9 is scheduled for October 2026, and external 14A design commitments are expected to build from H2 2026 into H1 2027. 18A-P is slated to be ready for external customers before the end of 2026. Advanced-packaging revenue is expected to begin in 2027, with 14A internal risk production in 2H 2027 and a high-volume ramp committed for 2028.
- Q3 2026Q3 2026 results — Tests the 42% gross-margin guide and the supply-limited step-up.
- H2 202614A design commitments — Named external customers would resolve the 10-Q contingency.
- October 202614A PDK 0.9 release — Lets customers size product and volume on 14A.
- Before end of 202618A-P external ready — Customer engagement and announcements for 18A-P.
- 2027Advanced packaging revenue — EMIB-T backlog converts to revenue; Malaysia back-end progress.
- 2H 202714A risk production — Internal tape-out milestone ahead of the 2028 ramp.
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 | $12.5B | +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 | $2.8B | — |
| 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, or IDM. It designs the CPUs and other semiconductors that go into computing products, and it also develops leading-edge process nodes and advanced packaging. Its three reporting segments are CCPG — client processors and edge devices, renamed the Client Computing and Physical AI Group in Q2 2026 — DCAI, which sells x86 server CPUs, accelerators, networking and custom ASICs for data centers, and Intel Foundry, which makes leading-edge wafers and packaging. Brands include Intel Core and Core Ultra in client, Intel Xeon in servers, Intel Arc in graphics, and Gaudi in AI accelerators, a line the 10-K describes as an unsuccessful attempt to compete, with $375M of inventory charges in 2025 and $922M in 2024.
Intel operates as a vertically integrated manufacturer. It designs its own chips and predominantly manufactures them at its own facilities, many in the U.S. Oregon and Arizona are ramping Intel 18A; Ireland runs Intel 4 and Intel 3; Israel runs Intel 7. Assembly and test sit in China, New Mexico, Vietnam and Malaysia, with New Mexico the key advanced-packaging site and a new advanced-packaging facility being built in Malaysia. The foundry business is capital-heavy: management says cumulative U.S. capital spending in tools and space is approaching $100B from 2021 through 2026. Intel has also used joint ventures and partnerships — it repurchased the 49% stake in Ireland's Fab 34, and Arizona fabs 52 and 62 sit in a joint structure with Brookfield.
Business Segments
Competitive Landscape
Intel competes at every layer it sells into. Its 10-K says AMD is CCG's primary competitor, with ARM-based entrants — Apple, Qualcomm and MediaTek — also in client. In accelerators the rival is NVIDIA; in custom ASICs, Broadcom; and in leading-edge foundry, TSMC, which the filing says "holds a leading position in manufacturing at scale for the most advanced nodes," plus Samsung. Hyperscaler custom silicon from Amazon, Google, Meta and Microsoft adds another front. Management said in Q2 that "some areas we are still behind, but we are catching up very fast."
- AMDThe 10-K says AMD is CCG's primary competitor; it also competes in x86 server CPUs.
- TSMCThe filing says TSMC holds a leading position in manufacturing at scale for the most advanced nodes; Intel also uses it as a third-party foundry.
- NVIDIANamed as the GPU and AI-accelerator competitor; Intel's Xeon 6 was also selected as host CPU for NVIDIA's DGX Rubin NVL8 systems.
- BroadcomNamed as a custom-ASIC competitor.
- SamsungNamed among leading-edge foundry competitors.
Supply Chain
Intel makes most of its own wafers but depends on outside inputs. ASML is its sole supplier of EUV lithography tools; substrates, T-glass and memory are bought in; and TSMC supplies third-party foundry capacity for some products.
More on INTC: Earnings recap