CPU Demand Soars! CEO Lip-Bu Tan Raises Capex as Intel Charges Toward 18A

Intel (INTC-US) announced its second-quarter financial results on Thursday, July 23, with the standout highlight being its Data Center and AI (DCAI) business, which achieved $6.3 billion in revenue, a 59% year-over-year increase, becoming a powerful growth engine for the company.

Intel CEO Lip-Bu Tan clearly stated that AI is driving unprecedented computing demand, and Intel is well-positioned in CPUs, ASICs, and advanced packaging to precisely capture this growth opportunity.

The company's Q2 revenue reached $16.1 billion, a 25% year-over-year increase—the fastest growth since 2011—far exceeding analysts' expectations of $14.42 billion.

Although a significant book loss was recorded due to U.S. government shareholding restrictions, Intel achieved a net profit of $2.2 billion on a Non-GAAP basis, marking four consecutive quarters of profitability with increasing scale.

Thanks to economies of scale and product mix optimization, gross margin surged to 41.8%, a significant improvement from 29.7% in the same period last year, driving the stock price up approximately 11% in after-hours trading.

Market demand has now reached a 'sweet spot of strain,' with CEO Lip-Bu Tan revealing, 'In the data center space, CPU demand is taking off and has already exceeded our growing supply capacity.' This supply-demand imbalance has granted Intel long-absent pricing power.

CFO David Zinsner noted that actual pricing has outperformed expectations, with certain server CPU products in the Chinese market seeing price increases of over 10% compared to last quarter, and cumulative gains exceeding 40% since the beginning of the year.

Currently, Intel has signed 10 long-term procurement agreements with customers to manage supply constraints. Not only Intel, but competitor AMD has also raised its forecast for the 2030 CPU market size to $220 billion, validating strong market appetite for high-performance computing workloads.

On the foundry front, Intel is also accelerating, achieving $5.8 billion in quarterly revenue, a 31% year-over-year increase. The company is making smooth progress on advanced processes, with the 18A process already supporting volume production of Panther Lake processors, and yield improvements exceeding expectations.

More significantly, Intel has for the first time disclosed a named foundry customer—cybersecurity company Fortinet—and secured substantial advanced packaging orders. While rumors persist about a potential Apple co-fabrication plant, Intel's strategic partnerships with giants like Google Cloud and Siemens are already forming a vast growth map, paving the way for future expansion.

In response to robust market demand, Intel has decisively increased investment, raising its full-year 2026 capital expenditure from $18 billion to $20 billion and committing to continued budget increases in 2027, with a focus on expanding Intel 3 process capacity and photomask manufacturing capabilities.

For the third quarter, Intel provided revenue guidance of $15.8 billion to $16.8 billion, above market expectations. Although concerns remain about the current P/E ratio of around 74x, as AI applications penetrate deeper into hardware layers, Intel, with its strong product portfolio and recovery momentum, is steadily delivering on its long-term growth strategy.