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Intel (INTC) will report its second-quarter financial results on Thursday, July 23, at a time when investor sentiment toward the stock has weakened significantly. Shares have declined by approximately 27% over the past month, largely reflecting profit-taking following a strong rally earlier in the year. The pullback has also been driven by persistent concerns over intensifying competitive pressures, which continue to weigh on INTC stock.
Despite the recent correction, Intel's operational turnaround appears to be progressing. Intel is expected to post healthy revenue growth, supported primarily by resilient demand for its server processors. At the same time, Intel is executing a long-term strategic transformation centered on two key priorities: expanding its presence in the artificial intelligence (AI) ecosystem and building a global contract semiconductor manufacturing business. These initiatives have the potential to diversify the company's revenue base, strengthen its competitive positioning, and create meaningful long-term growth opportunities.
Intel's Q2: Strong AI Demand and Improving Execution to Support Growth
Intel has regained momentum after several years of operational challenges, supported by robust demand for AI infrastructure and stronger execution across its core businesses. After delivering better-than-expected first-quarter results, the chipmaker looks well-positioned to extend that momentum into the second quarter.
Intel generated $13.6 billion in Q1 revenue, up 7% year-over-year (YOY), with AI-related businesses accounting for nearly 60% of total sales. Revenue from these operations jumped 40% from a year ago, reflecting Intel's increasing share in one of the industry's fastest-growing markets. That strength is expected to continue as enterprise AI adoption accelerates.
The Data Center and AI (DCAI) business is likely to remain Intel's primary growth engine. The segment generated $5.1 billion in revenue during the first quarter, representing 22% YOY growth. Enterprise customers continue to increase spending on CPUs to support AI workloads as the market shifts from model training toward inference and agentic AI applications. Demand for custom AI silicon is also strengthening, with application-specific integrated circuit (ASIC) revenue nearly doubling from the prior year in Q1.
Management expects second-quarter revenue between $13.8 billion and $14.8 billion, implying sequential growth. The DCAI segment is also expected to deliver another quarter of double-digit growth. Adding to its long-term growth prospects, Intel secured several strategic AI infrastructure agreements during the first quarter, including an expanded partnership with Alphabet's (GOOG) (GOOGL) Google.
Furthermore, profitability is expected to improve. Higher volumes, improved product mix, and pricing initiatives should support adjusted gross margin expansion, while continued cost discipline and operating leverage are likely to drive stronger earnings.
Intel expects adjusted earnings per share (EPS) of $0.20 for the second quarter. Notably, Q2 will likely mark a significant turnaround in the company’s bottom line from the loss reported a year earlier. By comparison, Wall Street analysts currently expect earnings of $0.10 per share. Notably, Intel has exceeded consensus EPS estimates in each of the past three quarters by a wide margin, raising the possibility of another earnings surprise with demand trends remaining intact.
The Bottom Line
Intel heads into its second-quarter earnings report after a sharp pullback. The company continues to benefit from robust AI infrastructure spending, particularly in its DCAI business, while its expanding custom silicon portfolio and growing foundry business provide additional long-term growth opportunities.
While Intel is likely to deliver strong sales, improved mix, higher pricing, and continued cost discipline will enable the company to deliver strong earnings.
Execution risks and intense competition remain important challenges. However, improving operating fundamentals suggest the company's recovery is gaining momentum. With investor sentiment still cautious, a strong Q2 report could be the catalyst to shift the narrative back in Intel's favor.
Wall Street remains cautiously optimistic, with analysts maintaining a “Moderate Buy” consensus rating for INTC heading into the earnings release.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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