Intel shares surged nearly 11% in initial after-hours trading on Thursday after the chipmaker reported second-quarter revenue and adjusted earnings that comfortably exceeded Wall Street expectations. The stock later trimmed its gains as executives outlined higher spending plans and ongoing supply constraints during the earnings call.

The company posted Q2 revenue of $16.1 billion, representing a 25% increase from $12.9 billion in the same period a year earlier and surpassing the $14.42 billion analyst consensus. Adjusted earnings reached $0.42 per share — double the $0.21 consensus estimate and a sharp improvement from a $0.10 loss per share in the year-ago quarter.

Adjusted gross margin expanded to 41.8%, up from 29.7% a year earlier and above the 38.8% anticipated by analysts. Intel generated $7 billion in operating cash flow during the quarter.

AI Demand Drives Data Center Growth

Data Center and AI revenue surged 59% to $6.3 billion, as server processor demand outstripped Intel's available supply. The segment topped Wall Street's $5.37 billion forecast, driven by increased CPU orders from cloud providers and enterprises building AI-agent infrastructure. The results signal that Intel is capturing a meaningful share of the same AI infrastructure buildout that has driven surging demand for accelerators from competitors like Nvidia and AMD, with cloud providers deploying both GPUs and CPUs in large-scale AI systems.

Client Computing and Physical AI revenue rose 13% to $8.9 billion. Intel Foundry generated $5.8 billion, a 31% year-over-year increase. The foundry business remains central to Intel's turnaround strategy under CEO Lip-Bu Tan, who has refocused the company on its contract manufacturing ambitions as it seeks to compete with industry leader TSMC for advanced chip production. The foundry push gained particular attention after reports in June linked Google and Nvidia to potential manufacturing demand, sending shares sharply higher.

The second-quarter gains extend a rally that began when Intel hit a record high following its first-quarter earnings. INTC remains more than 170% higher in 2026, even after pulling back from its June peak during a broader semiconductor selloff.

Intel Raises Spending and Q3 Outlook

For the third quarter, Intel projects revenue between $15.8 billion and $16.8 billion, above the $15.1 billion analyst forecast. Adjusted earnings are expected at $0.38 per share, compared with the $0.27 Wall Street consensus.

The company increased its 2026 capital expenditure plan to $20 billion, up from $18 billion, and anticipates further spending growth next year. The elevated spending reflects the cost of expanding fabrication capacity and advancing process technology as Intel races to close the manufacturing gap with TSMC. Intel has secured three-to-five-year agreements covering data center CPUs and specialized processors, with certain contracts including volume and pricing commitments.

On a GAAP basis, Intel recorded an $11 billion net loss due to an approximately $12.5 billion mark-to-market charge tied to shares held in escrow under its agreement with the U.S. government. The escrow arrangement stems from the CHIPS and Science Act funding Intel received as part of a federal program to bolster domestic semiconductor manufacturing, with the government holding equity warrants whose value fluctuates with Intel's share price. Core operations produced $1.8 billion in operating income and $2.2 billion in adjusted net income.

CEO Lip-Bu Tan stated that stronger customer engagement has made Intel fully committed to high-volume production of its next-generation 14A manufacturing process, targeted for 2028. The 14A node represents Intel's most advanced planned manufacturing technology and is central to the company's effort to reclaim process leadership and attract foundry customers who currently rely on TSMC.