The takeaway: There was a point not long ago when Intel was in so much trouble that a takeover of the company seemed inevitable. Now, Team Blue has turned its business around to the point where it’s just experienced its fastest growth in 15 years, but it’s come at a very high cost.
Intel reported second-quarter revenue of $16.1 billion, up 25% year over year and well ahead of Wall Street’s expectations. Adjusted earnings reached $0.42 per share, almost double analysts’ forecasts, while the company expects current-quarter sales of between $15.8 billion and $16.8 billion.
As with so many tech giants, Intel’s biggest contributor was its Data Center and AI division. Revenue from the unit jumped 59% to $6.3 billion as demand for CPUs used alongside AI accelerators continued to surge. The Client Computing and Physical AI group grew 13% to $8.9 billion, while foundry revenue increased 31% to $5.8 billion.
But the AI boom is also creating problems for Intel’s traditional PC business. Memory manufacturers have redirected capacity toward high-margin data-centre products, contributing to the well-documented shortages and rising prices for consumer hardware. Intel expects PC demand to be weaker than usual during the second half of 2026 and the market to decline by a low-double-digit percentage for the full year.
The results mark an incredible turn around in fortunes compared to recent years, when Intel’s server CPU shipments had fallen to a 14-year low. The company recorded an $18.8 billion annual net loss in 2024, its first since 1986, and the foundry division lost more than $13 billion. Reports that Qualcomm could acquire Intel and that TSMC might take control of its manufacturing operations no longer sounded far-fetched – even our recent ‘AMD to buy Intel’ April Fools’ joke was believable enough to convince a lot of people.
But the latest results came with caveats. Intel did post an $11 billion GAAP net loss, though this was mainly due to a $12.5 billion mark-to-market charge linked to shares held in escrow under the US government’s investment deal. On an adjusted basis, the company made a $2.2 billion profit.
Intel also recorded negative adjusted free cash flow of $8.4 billion, compared with negative $1.1 billion a year earlier. However, the figure was heavily affected by a $12.2 billion net outflow related to partner contributions and $617 million in finance lease payments. The underlying business generated $7 billion in operating cash flow during the quarter.
Nevertheless, Intel is about to spend considerably more. It raised its 2026 capital expenditure forecast from $18 billion to more than $20 billion and warned that next year’s total will be “significantly above” this year’s level. The money will go toward equipment, clean-room space, substrates, and expanding production capacity.
Intel is not alone in seeing booming AI-related growth accompanied by negative cash flow. Google recently reported its first negative free cash flow since going public, at $5.9 billion, as annual capital spending heads toward $205 billion. Tesla also recorded negative free cash flow of $1.1 billion while preparing to spend up to $25 billion this year.
Intel’s foundry operation continues to struggle, losing $2.1 billion during the quarter and still lacking the major external customers needed to justify its huge investments. But after years of delays, layoffs, shrinking market share, and questions about its very survival, CEO Lip-Bu Tan’s “New Intel” is finally beginning to resemble the industry giant it once was.
