Intel Corp. shares are on track to hit their highest level ever after the chipmaker delivered a sales forecast that shattered Wall Street expectations.
Revenue will be $13.8 billion to $14.8 billion in the June quarter, the company said Thursday in a statement. Analysts estimated $13 billion on average, according to data compiled by Bloomberg.
Intel shares soared as much as 31% in premarket trading on Friday, setting up the stock to surpass its last peak about 26 years ago. It had gained 81% this year heading into the report, closing at $66.78.
The upbeat outlook suggests that Chief Executive Officer Lip-Bu Tan is making progress on a comeback plan that aims to position the chipmaker to benefit from the build out of artificial intelligence computing. After lining up major investments in Intel last year — helping to strengthen the company’s balance sheet — he’s now delivering on a promise to improve operations.
“Everyone is starting to direct orders to Intel, and I think we are in the early days,” Great Hill Capital Chairman Thomas Hayes, an Intel investor, said on Bloomberg Television. “This has gone from despondency to euphoria in a very short period of time.”
The US government has made a significant gain after announcing an investment in August, according to Bloomberg calculations. After agreeing to buy in at $20.47 for a total of about $8.9 billion, the US holding would be worth more than $37 billion on paper if the share gains hold. Technically, taxpayers own only about 274.6 million shares and the rest remain in an escrow account awaiting additional funds from a program through which the government gets secure chip production for military needs. However, all of the shares are accounted for on Intel’s balance sheet, per Securities & Exchange Commission rules.
Meeting Demand
The earnings report shows that the need for data center chips to power the massive AI expansion is lifting demand for Intel’s flagship Xeon server processors. That type of generalist semiconductor — the central processing unit, or CPU — is a renewed focus for companies trying to turn their AI software into services that bring in revenue.
In an interview, Tan said Intel delivered a “solid result” that was ahead of its projections. He expects the strong demand for processors used in AI systems to expand and said the company is “laser-focused” on increasing output from Intel’s factories, which still can’t produce enough to fill all its orders.
“There is huge demand,” Tan said. “We are working very hard with our team to make sure we deliver, that we meet that demand but we are still short because the demand keeps increasing from the customers.”
For now, Intel has also been able to navigate another challenge the PC industry is facing: memory-chip shortages.
Red-hot demand for server products has lured memory suppliers into concentrating on the high-speed processors for those machines. That’s cut into production of standard products used in phones and personal computers, meaning fewer of those mass-market devices are being built and the prices are going up.
In addition to making progress on production, Tan has restored Intel’s balance sheet via outside investments — to the point where the company bought back part of a factory in Ireland that it had been forced to sell to raise cash.
That purchase was taken as a sign of future confidence by investors. Adding to the optimism, Tesla Inc. CEO Elon Musk said Wednesday that he will use Intel technology as part of his effort to build an in-house chip manufacturing plant. Tan declined to provide further details on the relationship.
Profits
Second-quarter earnings will be about 20 cents a share, excluding some items, Intel said. That compares with a Wall Street prediction of 9 cents.
In the first quarter, which ended March 28, revenue rose 7% to $13.6 billion. Profit was 29 cents a share, excluding some items. Analysts, on average, had estimated sales of $12.4 billion and earnings of 1 cent, according to data compiled by Bloomberg.
Gross margin, the percentage of revenue remaining after deducting the cost of production, was 41% in the quarter on an adjusted basis. When Intel was at the height of its powers, it regularly reported margins north of 60%. It predicted a margin of 39% in the current period.
Intel will spend more than originally budgeted on new production equipment, according to Chief Financial Officer Dave Zinsner. The company has plenty of factory space and will add more machines to fill it out, he said. Capital expenditures will now be about flat from where they were last year. Intel had earlier said it planned to reduce its outlay.
A ‘Different Company’
The Santa Clara, California-based company has a long way to go to restore its former chip-industry glory. Its annual revenue of $53 billion last year was roughly $25 billion shy of the company’s peak revenue, achieved in 2021. Wall Street projects 3% growth in 2026.
The Intel Foundry Services division — the company’s factory unit — generated revenue of $5.4 billion, up 16%. That unit currently relies almost exclusively on Intel product divisions for orders, though it is seeking outside customers. Its PC chip division had revenue of $7.7 billion, and the data center unit posted sales of $5.1 billion. All of those totals topped Wall Street estimates.
Intel has so far failed to field the type of AI accelerator that’s made Nvidia Corp. the richest in the chip industry and the most valuable publicly traded company in the world. Nvidia and others now are putting more energy into producing microprocessors that are needed to help orchestrate work done in AI data centers. That type of computing was long the domain of Intel’s Xeon lineup, which once had a market share of more than 99%.
Tan said Intel is now a “fundamentally different company” than last year, when he became CEO.
“A year ago, the conversation about Intel was about whether we could survive,” he said. “Today, it’s about how quickly we can add manufacturing capacity and scale our supply to meet the enormous demand for our products.”
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