- Intel beats forecasts as AI demand drives strongest revenue growth in over a decade.
- Data centre sales surge as customers increase spending on AI infrastructure.
- Shares jump as turnaround progress and upbeat outlook boost investor confidence.
Intel (INTC) exceeded Wall Street expectations in the second quarter after strong demand for artificial intelligence computing drove its fastest quarterly revenue growth since 2011, while an upbeat outlook for the current quarter sent the shares higher in extended trading.
The chipmaker reported adjusted earnings per share of 42 cents on revenue of $16.1 billion, beating analyst forecasts of 21 cents and revenue of $14.42 billion. Following the results, Intel shares rose more than 7% in after-hours trading, having briefly climbed by more than 10%.
For the third quarter, Intel forecast adjusted earnings of 38 cents per share on revenue of between $15.8 billion and $16.8 billion. Analysts had been expecting earnings of 27 cents per share and revenue of around $15.1 billion.
Chief executive Lip-Bu Tan said artificial intelligence is creating unprecedented demand for computing power, adding that Intel is positioned to benefit as it continues executing its turnaround strategy across both its processor and manufacturing businesses.
Chief financial officer David Zinsner said the company delivered a stronger quarter through robust customer demand, improved execution, higher factory yields and faster production cycles. He added that Intel plans to increase investment in manufacturing equipment, clean room capacity and substrates to support expected growth this year and next.
The data centre business produced one of the strongest performances during the quarter, with revenue rising 59% from a year earlier to $6.3 billion, comfortably ahead of analyst expectations of $5.54 billion. Intel’s client computing division, which remains its largest business, generated revenue of $8.9 billion, exceeding forecasts of $7.99 billion after growing 13% year on year.
Intel also revealed it has signed 10 long-term agreements with customers for its server processors, with some contracts locking in pricing while others secure future production volumes. Zinsner said demand from data centre customers continues to exceed the company’s manufacturing capacity as spending on AI infrastructure remains strong.
The company said its foundry division generated revenue of $5.8 billion during the quarter, an increase of 31% compared with a year earlier, although it did not announce any major new manufacturing customers. Earlier this week, Intel confirmed Fortinet had become the first named foundry customer secured under Tan’s leadership, using an older manufacturing process for security chips.
Gross margin recovered to 42%, up from 2.5% a year earlier, which Intel attributed to higher sales volumes, improved product mix and stronger pricing.
The results come shortly after Intel confirmed job cuts within its data centre division as part of efforts to streamline the business. The company said the changes are intended to ensure it has the right skills and structure to support long-term growth while providing assistance to affected employees.
Intel has been one of the strongest-performing semiconductor stocks this year, with the shares gaining more than 170% despite a sharp decline during July. Continued investment in AI infrastructure, growing demand for server processors and improving manufacturing performance have helped reinforce confidence that the company’s turnaround is gathering pace.
