Intel boosts spending plans on AI boom
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Intel expects third-quarter revenue between US$15.8 billion and US$16.8 billion.
PHOTO: REUTERS
- Intel forecasted higher-than-expected quarterly profit and revenue, driven by strong AI data center CPU demand, boosting its shares by 12% after hours.
- The company raised its capital expenditure forecast to $20 billion for this year and plans more spending next year, signalling confidence in AI growth opportunities.
- Intel's contract manufacturing business gained traction, securing Tesla for its next-gen AI chip, supporting its strategy to compete with Nvidia and AMD in AI chips.
AI generated
SAN FRANCISCO – Intel forecast quarterly profit and revenue above estimates on July 23, pushing its shares up 12 per cent in after-hours trade.
The US chip giant also boosted its spending plans over the next two years as an AI data centre build-out increases demand for its central processing units (CPUs).
Intel expects third-quarter revenue of between US$15.8 billion and US$16.8 billion, compared with analysts’ average estimate of US$15.10 billion, according to data compiled by LSEG.
Adjusted profit is expected to be 38 US cents a share, compared with analysts’ estimates of 27 US cents a share.
The company is benefiting from a boom in what is known as agentic AI, where autonomous agents carry out tasks such as computer coding on behalf of human users.
Its shares have declined more than 25 per cent from a record close on June 22 amid a broader sell-off in chip stocks, though they are up more than 170 per cent in 2026.
For the second quarter ended June 27, Intel said sales rose 25.4 per cent to US$16.13 billion, while adjusted profit was 42 US cents per share, compared with estimates of US$14.42 billion and 21 US cents per share.
Adjusted gross margin came in at 41.8 per cent, compared with estimates of 38.8 per cent.
Agentic AI drives CPU demand surge
The shift towards AI agents has driven a resurgence of demand for data centre CPUs, with Intel’s leaders saying earlier in 2026 that it had caught them off guard, with demand outstripping the company’s ability to manufacture the chips.
In an interview, chief financial officer David Zinsner told Reuters that booming demand has prompted Intel to raise its capital expenditure forecast for 2026 from US$18 billion to US$20 billion.
Zinsner also said Intel expects capital expenditure to be “up meaningfully next year” too.
“That’s signalling the confidence around the growth opportunities for the business,” Zinsner said.
He said the company has signed a range of long-term agreements with customers for data centre CPUs and specialised chips called XPUs.
The agreements range from three to five years, and some contain both chip volume and price commitments, while others contain only volume commitments, Zinsner added.
But he also said that Intel would remain disciplined about spending.
“You can’t completely hang your hat on (long-term agreements) because when things change, a lot of times things get renegotiated,” Zinsner said.
However, customers are “not signing those unless they have real confidence in what they’re going to invest”.
He added: “It gives us pretty good confidence around what we should be planning in terms of output.”
Zinsner said Intel has about US$30 billion in cash and a US$10 billion line of credit, but that a share sale, while currently not authorised, is not out of the question.
“I wouldn’t (dismiss) the possibility that we would do that. But (we have) no specific plans at this point,” he said.
The results vindicate chief executive Lip-Bu Tan’s costly strategy to regain technology leadership and compete with rivals such as Nvidia and AMD in the booming market for AI chips.
Investors are closely watching Intel’s data centre and contract manufacturing, or foundry, businesses as key indicators of the turnaround’s success.
For Intel’s data centre and AI business, the company said second-quarter revenue was US$6.26 billion, compared with estimates of US$5.37 billion.
Also in extended trade, rival chipmakers Arm Holdings and Advanced Micro Devices rallied more than 3 per cent each, and, along with Intel, created more than US$100 billion in stock market value.
Intel said sales in its laptop and desktop segment were US$8.88 billion in the second quarter, compared with estimates of US$7.89 billion.
Zinsner said that in the company’s laptop and desktop business, unit sales were down, but average prices were up as Intel shifted away from supplying lower-cost chips for entry-level machines and back to chips for higher-end devices.
Contract manufacturing gains traction
A key part of Intel’s revival strategy is its contract manufacturing, or foundry business.
Intel’s foundry business generated US$5.77 billion in second-quarter sales, compared with analyst estimates of US$5.55 billion.
The unit secured Elon Musk’s Tesla as a customer for its next-generation 14A process for the “Terafab” AI chip project, bolstering confidence in Intel’s efforts to land major buyers.
Expectations of another high-profile win rose in April after US President Donald Trump announced that Apple had agreed to manufacture processors with Intel.
Neither company has confirmed the deal.
Nvidia, which dominates the AI accelerator market, is also making a rare move into the CPU space with its “Vera” processor, while Big Tech firms such as Amazon and Alphabet continue to develop their own in-house, Arm-based CPUs.
