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    INTC
    Earnings call· Jun 2026(Q2 FY26)

    INTEL CORP INTC

    Jul 23, 2026 Source

    Executive summary

    Intel Q2 FY26 — Strong AI Demand Drives Record Server Growth and Increased CapEx

    Intel delivered solid Q2 FY26 results, exceeding financial guidance across revenue, gross margin, and EPS, driven by robust demand for AI and server products. The company is significantly increasing CapEx for 2026 and 2027 to address persistent industry-wide supply constraints and capitalize on strong customer demand, particularly for its Intel Foundry and advanced packaging technologies. Management expressed confidence in its product roadmap and foundry execution, despite ongoing supply challenges and a softer PC market.

    Highlights

    5

    • Revenue was $16.1 billion, $1.8 billion above the midpoint of guidance.

    • Non-GAAP gross margin was 41.8%, approximately 280 basis points better than guidance.

    • Non-GAAP earnings per share was $0.42, exceeding guidance of $0.20.

    • AI-driven businesses grew greater than 70% year-over-year, contributing approximately 70% of revenue.

    • Data Center AI Group (DCAI) revenue increased 59% year-over-year, marking the strongest server growth on record.

    Concerns

    4

    • Industry-wide supply constraints across wafers, memory, and substrates persist for the foreseeable future.

    • PC consumption is expected to be subseasonal in the second half of 2026 and down low double digits percent for the full year.

    • Intel Foundry reported an operating loss of $2.1 billion in Q2 FY26.

    • Client Computing and Physical AI Group (CCPG) operating profit was down approximately $173 million quarter-over-quarter due to inventory charges.

    Guidance & targets

    14
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $15.8 billion to $16.8 billion
    high materiality
    High
    Q3 FY26 Non-GAAP Gross Margin
    42%
    medium materiality
    High
    Q3 FY26 Non-GAAP Tax Rate
    11%
    low materiality
    High
    Q3 FY26 Non-GAAP EPS
    $0.38
    high materiality
    High
    FY26 Non-GAAP Operating Expenses
    ~$16.5 billion
    medium materiality
    High
    FY26 CapEx
    more than $20 billion
    high materiality
    High
    FY27 CapEx
    significantly above the 2026 levels
    high materiality
    Medium
    FY26 PC Consumption
    down low double digits percent
    medium materiality
    High
    Industry Server CPU Unit Growth
    strong double-digit unit growth
    high materiality
    High
    Intel Foundry 14A Risk Production
    second half of 2027
    medium materiality
    High
    Intel Foundry 14A High-Volume Ramp
    2028
    medium materiality
    High
    EMIB-T Customer Ramps
    2027
    medium materiality
    High
    Noncontrolling Interest (NCI) GAAP
    ~$250 million
    low materiality
    High
    Noncontrolling Interest (NCI) GAAP
    ~$1.1 billion
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Client Computing and Physical AI Group (CCPG)
    Revenue was better than expectations, driven by ASPs and a mix shift to higher-end products. Operating profit was down approximately $173 million quarter-over-quarter due to inventory charges taken to optimize the factory network.
    AI PC revenue: 26% QoQ growthAI PC revenue: 2/3 of client revenue mixEdge deployments: ~10% of CCPG revenuevPro manageability software activations: 1,500% over last 4 quartersSeries 3 design wins for edge AI: 130
    		$8.9 billion—15%$2.3 billion operating profit (26% of revenue)
    Data Center AI Group (DCAI)
    Revenue was meaningfully ahead of expectations, driven by strong demand across hyperscale and enterprise. Operating profit was up approximately $1 billion quarter-over-quarter on higher revenue, improved product margins, and lower operating expenses.
    Purpose-built silicon product line revenue: ~20% QoQ growthPurpose-built silicon product line revenue: nearly tripling YoY
    		$6.3 billion59%24%$2.5 billion operating profit (40% of revenue)
    Intel Foundry
    Revenue was up sequentially on higher fab volumes, driven by strong growth in Intel 18A output. Operating loss improved by $348 million quarter-over-quarter due to higher yields, improved cycle times, and increased factory scale across Intel 4, 3, and 18A.
    18A output: 25% above target18A output: >50% QoQ growthExternal foundry revenue: $293 millionCost of primary Panther Lake SKU: down ~50% YTDCost of primary Panther Lake SKU: on track for additional 20% reduction this year
    		$5.8 billion—6%-$2.1 billion operating loss

    Operational metrics

    11
    Non-GAAP Gross Margin
    41.8%280 bps better than guidance
    Q2 FY26

    Upside driven by higher revenue, better yields, and higher ASPs due to mix and pricing actions.

    Non-GAAP EPS
    $0.42versus guidance of $0.20
    Q2 FY26

    Driven by higher revenue, stronger gross margins, and solid operating leverage.

    Cash and investments balance
    $30 billion
    Q2 FY26

    Exited the quarter in a strong liquidity position.

    Liquidity
    $40 billion
    Q2 FY26

    Enabled the company to delever and maintain investment-grade territory.

    AI-driven businesses revenue growth
    >70%YoY
    Q2 FY26

    Includes record data center growth.

    Design services business revenue growth
    nearly 3xYoY
    Q2 FY26

    Tremendous opportunities to leverage x86-based computing franchise.

    ASIC business run rate
    ~$2 billion
    Q2 FY26

    Approaching this run rate, with a target of $4 billion in the not-too-distant future.

    US Capital Spending (2021-2026)
    ~$100 billionsignificantly higher than any other semiconductor company
    2021-2026

    Total capital spending in tools and space in the U.S.

    Investment Tax Credit (AMIC)
    $0.35 on the dollar
    ongoing

    Received back from the investment tax credit on everything invested in the U.S., with a delay factor.

    Intel Foundry 18A output
    25% above target>50% QoQ
    Q2 FY26

    Driven by improving yields, better cycle times, and increasing wafer starts.

    Intel Foundry Panther Lake SKU cost reduction
    ~50%
    YTD

    Driven down year-to-date, with further meaningful reductions planned in 2027.

    Industry KPIs

    7
    MetricValueDetails
    Backlog order bookgrowing EMIB-T backlog
    Ai data center revenue$6.3 billionUSD
    Fab capacity utilization18A output approximately 25% above target%
    Design wins socket pipeline130 Series 3 design winswins
    Inventory channel inventoryinventory charges taken
    Node platform ramp schedule14A risk production in 2H 2027, high-volume ramp in 2028
    End market segment revenue mixAI-driven businesses contributed ~70% of revenue%

    Orderbook & backlog

    1
    EMIB-T backloggrowingQ2 FY26

    Yield and reliability are hitting targets, focused on ramping to high volume and quality to support customer ramps in 2027.

    Product announcements

    3
    ProductTypeDetails
    Intel Arc G-Series processorslaunch
    Xeon 6+ codenamed Clearwater Forestlaunch
    New controller and adapter productslaunch

    Deals & partnerships

    3
    Google CloudDeepening collaboration to accelerate AI-first mentality.

    Deepening collaboration to accelerate transformation and fully embrace an AI-first mentality throughout operations.

    SambaNovaMultiyear collaboration to drive performance and power improvements with disaggregated inference.multiyear

    Extended heterogeneous AI strategy through a multiyear collaboration to drive performance and power improvements with disaggregated inference.

    FortinetCollaboration for their security processor, driving next-generation security ASIC business.

    Collaboration for their security processor is a strong step forward in Intel's ASIC strategy, driving next-generation security with higher performance.

    Capital programs

    1
    US Capital Spendingunderway~$100 billion
    Start: 2021

    Benefit: tools and space

    Total capital spending in tools and space in the U.S. from 2021 through 2026, significantly higher than any other semiconductor company over that time frame.

    Risks & headwinds

    4
    Industry-wide supply constraints (wafers, memory, substrates)foreseeable future

    These shortages will persist for the foreseeable future.

    Mitigation: Substantially increasing investments to support improving demand outlook; aggressively locking in tool purchase orders, accelerating clean room build-outs, and actively securing supply of substrates and memory.

    Softer PC marketH2 2026, FY26

    PC consumption to be subseasonal in the second half of the year and down low double digits percent for all of 2026, impacted by rising memory prices and constraints.

    Mitigation: Improving supply, strengthening product portfolio, and encouraging tailwinds for edge deployments provide positive offsets. Production will pivot as much as possible to data center CPUs.

    Inventory charges in CCPGQ2 FY26

    Operating profit for CCPG was down approximately $173 million quarter-over-quarter due to inventory charges.

    Mitigation: Charges taken to optimize factory network and pivot to other products, as it made better economic sense not to complete certain products due to challenges around match sets.

    Memory price increases and constraintsH2 2026

    PC consumption impacted by rising memory prices and constraints.

    Mitigation: Actively securing supply of substrates and memory.

    What to watch in Q3 FY26

    5

    Intel Foundry 14A PDK 0.9 completion

    October (Q3 FY26)
    CurrentPDK 0.5 complete, 0.9 on track
    TargetPDK 0.9 complete

    Why it matters

    Completion of PDK 0.9 is a critical milestone for 14A development, indicating readiness for external customer engagement and future volume production.

    PDK 0.5 is now complete, and PDK 0.9 is on track for October.

    Q&A highlights

    7

    What does the CapEx increase imply for foundry customers (14A, 18A-P) and packaging, and how is it delineated?

    The CapEx increase is broad-based, covering advanced packaging (EMIB-T) and front-end fabs, with a skew towards front-end. It signals confidence in customer demand across all business units, particularly from long-term agreements, and is subject to disciplined spending for good returns.

    “this increased investment is a signal of our confidence in customers across all of our business units.”

    asked by Benjamin Reitzes · answered by David Zinsner

    2 min read6 chapters

    Detailed Narrative

    01

    AI-Driven Growth and Supply Constraints

    Intel's AI-driven businesses demonstrated robust performance, growing over 70% year-over-year and contributing approximately 70% of total revenue in Q2 FY26. This strong demand, particularly in data centers, continues to outpace Intel's growing supply capabilities. The industry faces persistent constraints across wafers, memory, and substrates, which are expected to continue for the foreseeable future, posing a dominant challenge for customers building AI infrastructure.

    02

    Intel Foundry Progress and Roadmap

    Intel reported significant advancements in its foundry operations, with Intel 7, Intel 3, and Intel 18A exceeding internal volume targets due to improved yields and cycle times. 18A output increased meaningfully, tracking ahead of expectations, and risk production for 18A-P has commenced, offering enhanced performance. Development for Intel 14A is ahead of schedule, with PDK 0.5 complete and PDK 0.9 on track for October, paving the way for risk production in the second half of 2027 and high-volume ramp in 2028.

    03

    Increased Capital Investments for Capacity Expansion

    Driven by strong customer demand signals and long-term agreements, Intel is raising its 2026 CapEx outlook to over $20 billion and anticipates 2027 CapEx to be significantly higher. These investments are broad-based, targeting advanced packaging (EMIB-T) and front-end fabs, with the majority allocated to the U.S. The company emphasizes disciplined spending, ensuring investments are tied to confirmed customer commitments and expected to generate strong returns over the long term⏳.

    04

    Client and Data Center Performance Highlights

    The Client Computing and Physical AI Group (CCPG) exceeded expectations, with revenue driven by favorable ASPs and a mix shift towards higher-end products, despite a softer overall PC market. The Data Center AI Group (DCAI) achieved record year-over-year server growth of 59%, fueled by strong demand from hyperscale and enterprise customers. Xeon 6 is noted as one of Intel's fastest-ramping products, reflecting improved execution and robust customer interest.

    05

    Expanding ASIC Business Opportunity

    Intel's design services business, focused on purpose-built silicon (ASICs), demonstrated substantial growth, with revenue nearly tripling year-over-year and approaching a $2 billion run rate, targeting $4 billion in the near future. The company views this as a massive, potentially $100 billion, market opportunity. Intel leverages its x86 franchise, IP portfolio, and advanced packaging capabilities to create customized solutions for the AI era, exemplified by a recent collaboration with Fortinet for security processors.

    06

    Strategic Collaborations and Talent Focus

    Intel is actively strengthening its strategic partnerships, including deepening its collaboration with Google Cloud to accelerate its AI-first strategy and extending its heterogeneous AI strategy through a multiyear collaboration with SambaNova. The company continues to attract world-class talent, such as Seok-Hee Lee for memory development, reinforcing its commitment to leadership and innovation in the evolving computing landscape.

    AI-generated summary of the company’s earnings call. Not investment advice.