Highlights

Intel recorded a sharp rise in Q2 revenue thanks to server CPU demand and higher prices.
Yet the stock appears more as a follower than a frontrunner in the market.

Better late than never: Intel has now entered the artificial intelligence infrastructure expansion, as its data center and AI segment revenue climbed sharply in the second quarter. Shares rose after hours but later retreated when leaders noted plans for a notable increase in capital spending this year. AI-related companies that boost capex have faced pressure during this earnings period.

Intel shares have dropped roughly one third from recent peaks. Even so, the stock remains higher by more than 150 percent year to date and over 300 percent across the past twelve months.

Server CPUs drive results

The main factor behind Intel growth came from data center central processing units. Demand for server CPUs rose sequentially in the second quarter, and leaders forecast double-digit industry expansion this year and next, with strength extending into 2028. Supply continues to lag demand, supporting higher CPU prices industry wide.

This contributed to a 59 percent increase in data center and AI product revenue, reaching 6.3 billion dollars. Client computing group product revenue grew 13 percent year over year to 8.9 billion dollars, pushing total product revenue up 28 percent to 15.1 billion dollars. That marked a clear improvement from the 9 percent product revenue gain seen in the first quarter.

Intel foundry revenue advanced 31 percent to 5.8 billion dollars. The segment still recorded a 2.1 billion dollar operating loss for the quarter. Revenue from remaining businesses fell 33 percent year over year to 0.7 billion dollars, mainly due to the sale of 51 percent of its Altera unit.

Total Intel revenue rose 25 percent to 16.1 billion dollars, marking the fastest growth in nearly fifteen years. Adjusted earnings per share shifted from a loss of 0.10 dollars to a profit of 0.42 dollars, aided by a 1,290 basis point expansion in gross margins to 40.4 percent.

Looking forward, Intel guided Q3 revenue between 15.8 billion and 16.8 billion dollars with adjusted EPS of 0.38 dollars. Those figures exceeded analyst estimates of 0.27 dollars in EPS and 15.1 billion dollars in sales. Gross margins were projected near 41 percent.

Supply limits are expected to persist next quarter, with relief emerging late in the period and into the fourth quarter. The company raised its 2026 capex outlook from an initial range of 17 billion to 18 billion dollars to over 20 billion dollars. Spending for 2027 is anticipated to exceed 2026 levels by a wide margin.

Is Intel stock a buy?

Although Intel is gaining traction in its data center and AI segment, the momentum appears tied more to hyperscaler urgency for server CPUs to support agentic AI workloads than to major company initiatives. CPU demand remains elevated, which supports pricing power in client computing areas. The foundry operation is showing some progress yet continues to consume cash amid a strong semiconductor cycle.

Prior to its recent advance, Intel traded at a discount near the value of its tangible assets. It now carries a forward price to earnings ratio of 105, leaving the valuation stretched for a firm that seems more reactive than leading. Stronger AI investment options exist elsewhere.