Intel reported second-quarter 2026 results that topped expectations on revenue, adjusted EPS and gross margin, then followed with third-quarter guidance that also came in ahead of consensus. The numbers pointed to stronger demand tied to AI infrastructure, especially across server CPUs, custom silicon and manufacturing capacity.
The company also raised its 2026 capital expenditure guidance from $18 billion to more than $20 billion and said 2027 spending would rise materially from that level. Intel said the new investment would support Intel 3, 18A, 18A-P and 14A process technologies, advanced packaging and EMIB-T, cleanroom construction, and supply assurance for substrates and memory.
At the same time, Intel Foundry still posted an operating loss of more than $2 billion, and revenue from external foundry customers remained limited. The heavier spending plan also keeps pressure on cash flow. Intel shares climbed about 13% in after-hours trading before the gain narrowed to about 4%.
Q2 results beat forecasts across revenue, earnings and margin
Intel posted Q2 revenue of $16.13 billion, up 25.4% from a year earlier, the fastest growth rate in 15 years. That was above consensus expectations of about $14.4 billion and $1.8 billion above the midpoint of the company’s prior guidance.
Adjusted EPS was $0.42, close to double the market expectation of $0.22. Adjusted gross margin reached 41.8%, up 12.1 percentage points year over year and 2.8 percentage points above company guidance. Higher revenue, stronger average selling prices, a better product mix and improved process yields helped adjusted operating profit reach $2.8 billion, versus a $500 million loss a year earlier.
On a GAAP basis, Intel reported a net loss of $11 billion, or -$2.16 per share, mainly because of a $12.5 billion non-cash fair value loss related to shares held in trust by the U.S. Department of Commerce. Excluding that item, net income was $2.2 billion.
Operating cash flow was positive, but free cash flow stayed negative
Second-quarter operating cash flow came in at $7 billion, and cash plus short-term investments stood at about $30 billion. Still, adjusted free cash flow was negative $8.4 billion after a net $12.2 billion outflow tied to partner funding.
Intel said its own capital expenditures in Q2 were $2.7 billion, which means the negative free cash flow reflected partner funding arrangements more than spending in the quarter itself. With manufacturing and back-end capacity investment set to rise further in 2027, improvement in cash flow could take longer.
Data center and AI revenue jumped 59%
Revenue from the data center and AI segment was $6.26 billion, up 59% year over year and 24% quarter over quarter, well above market expectations of about $5.4 billion. Operating profit rose to $2.47 billion, and operating margin improved to 39.5% from 16.1% a year earlier.
Intel attributed the growth mainly to strong server CPU demand from hyperscale cloud companies and enterprise customers. Revenue from custom chips nearly tripled from a year earlier and is now running at an annualized pace close to $2 billion. Intel said industrywide server CPU shipments are expected to post strong double-digit growth in both 2026 and 2027, with momentum potentially extending into 2028.
Client business beat expectations even as the PC market faces pressure
Revenue from the client and physical AI business reached $8.88 billion, up 13% from a year earlier and above market estimates of about $8 billion. AI PC revenue rose 26% from the prior quarter and now accounts for about two-thirds of client segment revenue. Edge computing contributed about 10%.
Intel said the gain was driven by a richer mix of high-end products, higher average selling prices and cost pass-through. At the same time, the company expects global PC consumption to fall by a low double-digit percentage in 2026 because of higher memory prices and supply constraints. It also said the second half of the year will be weaker than normal seasonality would suggest. Intel plans to redirect more of its limited capacity toward data center CPUs, where demand is stronger.
Foundry losses narrowed, but outside customer traction remains limited
Intel Foundry generated $5.77 billion in revenue in the quarter, up 31% year over year. Its operating loss narrowed to $2.09 billion from $3.17 billion a year earlier, and the loss margin improved from 71.7% to 36.2%.
18A output increased by more than 50% from the prior quarter, about 25% above Intel’s target. Better yields, cycle times and utilization helped cut manufacturing costs for major Panther Lake products by about 50% during the year, and the company said those costs could fall by another roughly 20% before year-end.
Intel said 18A-P has entered risk production. The 0.9 version of the 14A process design kit is scheduled for delivery in October, with risk production expected in the second half of 2027 and high-volume manufacturing in 2028.
Even so, external foundry revenue was only $293 million in the quarter, about 5% of segment revenue. Growth in the business still came mainly from Intel’s internal products. Management said customer feedback from outside clients has been positive, but it did not disclose any large production orders that would validate the commercial appeal of 18A-P or 14A.
Management flagged ongoing supply bottlenecks
On the earnings call, management said advanced-node logic chips, silicon wafers, memory, substrates and advanced packaging are all facing severe supply constraints, and shortages are expected to continue. Some bottlenecks may ease between late Q3 and Q4, which could leave room for more revenue growth in the fourth quarter, but Intel said it still does not expect to fully meet server CPU demand before the end of the year.
The company added that the higher capital spending plan is based on long-term customer agreements and demand signals. It did not disclose how much of the new investment is tied to external foundry customers, nor did it confirm whether 14A or 18A-P has secured formal high-volume production orders from major clients.
Intel currently has about $40 billion in liquidity and roughly $10 billion in non-core assets available for disposal. Management also said the company could turn to capital markets if future expansion needs exceed the support available from internal cash flow and customer prepayments.
Q3 guidance came in ahead of consensus
Intel expects third-quarter revenue of $15.8 billion to $16.8 billion, with a midpoint of $16.3 billion, up about 19% year over year and above the consensus estimate of about $15.1 billion. Adjusted EPS is projected at $0.38, and adjusted gross margin is expected to be 42%.
The company said Q3 gross margin should be roughly in line with Q2. New products including Panther Lake and Granite Rapids are still early in their ramp and carry unit costs above the company average. As yields and output improve on 18A, Intel said those costs could gradually become a support for gross margin in 2027.
Intel’s updated 2026 capex plan now sits above $20 billion, versus the earlier $18 billion target, and the company expects 2027 capital expenditures to come in materially above 2026. The additional spending will go toward process technology, advanced packaging, cleanroom construction, and supply support for substrates and memory.
According to SoSoValue Research, the report suggests Intel is regaining exposure to the AI infrastructure cycle. Server CPUs, custom silicon and the 18A ramp all helped improve revenue and profit. After-hours trading told a more measured story, though: the stock’s gain faded from about 13% to about 4%, leaving future attention on external foundry revenue, advanced-node customer wins, returns on capital and free cash flow.