Intel on July 24 issued third-quarter revenue guidance of $15.8 billion to $16.8 billion, a range that came in well above Wall Street’s $15.1 billion estimate even at the low end. The company said demand for data center computing helped support the stronger outlook.
The earnings release triggered a sharp move in after-hours trading. Intel shares jumped more than 13% at one point, then gave back most of those gains within a few hours, leaving the stock up about 3% by the time of publication. The report said part of that reversal may have been linked to an accounting loss of more than $11 billion shown in the results.
Data center demand lifted the forecast
Intel said revenue from its data center segment rose 59% year over year, more than twice the pace of the company’s overall growth. Total revenue rose 25% from a year earlier.
According to Bloomberg, the stronger-than-expected guidance was tied to a surge in data center spending. As the AI industry shifts from model training to inference, purchasing is no longer focused only on Nvidia accelerators. General-purpose central processing units, or CPUs, are moving back into procurement plans.
CEO Lip-Bu Tan told Bloomberg that “CPU is taking off” in data centers and that demand is running ahead of Intel’s expanding supply. He described that as “a good problem to have.” Tan also said production yields are improving, giving Intel more room to take on additional orders and raising the odds that other companies choose its foundry services. He did not name customers, but said several talks are underway and the earliest outcomes could be seen at the start of next year.
Capex plan shifts higher
Chief Financial Officer Dave Zinsner said Intel had originally planned to reduce capital spending but has now changed course and committed to spending more. Capital expenditure is expected to be about $20 billion this year and could rise again next year.
The report noted that a year ago Intel was still dealing with the loss of its manufacturing lead, a missed AI wave and continuing losses. Now it is also dealing with demand that is running ahead of supply.
Q2 GAAP loss tops $11 billion
Intel reported a second-quarter GAAP net loss of $11.033 billion, or $2.16 per share.
The gap was mainly caused by a $12.529 billion mark-to-market loss tied to custodial shares obtained by the U.S. government through warrants last year. Because Intel’s stock has surged this year, the value of those government-held shares increased, forcing the company to recognize a larger accounting loss. The report said this was a paper loss rather than a cash loss.
Margins improve, but foundry progress remains uneven
Adjusted gross margin reached 40.4% in the quarter, up nearly 13 percentage points from a year earlier. Even so, that remains below the 60%-plus level Intel posted at its peak.
Revenue from the foundry business came in at $5.8 billion, up 31% year over year, but almost all of those orders still came from Intel’s own product divisions. External customers have yet to show up in a meaningful way, and the company’s flagship Ohio factory site has been delayed more than once.
Before the latest results, Intel shares had already risen more than 170% this year, though the stock was still about 28% below its historical peak. The report said expectations had already moved ahead of the company’s fundamentals.