Intel Corporation (NASDAQ:INTC) saw its shares edge 0.7% lower to $91.67 in Monday's premarket session, a relatively modest decline compared to major rivals. NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD) each fell approximately 5%, while the broader PHLX Semiconductor Index dropped 2.2%. Intel's performance represented a 4.4 percentage point outperformance relative to its typical move, signaling that investors are beginning to differentiate between concerns over CPU supply constraints and the broader sell-off tied to accelerator-focused news.
The chipmaker's narrower loss reflects a strategic divergence in the market. Analysts point to Intel's robust server backlog and the nature of Monday's decline, which was driven largely by accelerator-related developments, as evidence that the company's AI-driven CPU business is gaining traction. This conclusion is reinforced by Intel's latest quarterly results, which showed its Data Center and AI (DCAI) division posting revenue of $6.262 billion, a 59% increase from $3.939 billion in the same period last year. Operating income for the segment surged to $2.474 billion, nearly four times higher than the prior year's $633 million.
According to company filings, DCAI contributed 70% of the revenue growth for Intel Products and accounted for 86% of the increase in operating income. While the division represented 41% of product revenue, it generated 51% of operating income, underscoring its growing profitability. The strong performance was not primarily driven by a rebound in PC volumes. Client segment revenue rose 13%, but unit shipments declined 8%, with average selling prices jumping 27% thanks to stronger sales of premium offerings.
Server business performance was particularly impressive. Server revenue climbed by $2.0 billion, with unit volumes up 9% and average selling prices surging 48%, driven by a more robust product mix. Chief Executive Lip-Bu Tan commented, "AI is driving unprecedented demand for compute." Total revenue increased 25% to $16.1 billion, while adjusted earnings came in at 42 cents per share.
Looking ahead, Intel forecast third-quarter revenue in a range of $15.8 billion to $16.8 billion, with the $16.3 billion midpoint coming in 7.9% higher than the previous LSEG consensus. The company also projected adjusted EPS of 38 cents, marking a 41% increase from the prior year. However, Intel continues to face demand exceeding its current internal server capacity. Chief Financial Officer David Zinsner noted that customer contracts now extend from three to five years, with some agreements covering both price and volume terms.
"The stock can continue revaluing," said Shay Boloor of the Futurum Group, citing ongoing data-center expansion and improved foundry economics as key drivers. The impact of external customers remains an important factor. Foundry revenue increased 31% to $5.765 billion, and the division's loss narrowed by $1.1 billion, though it still stood at $2.089 billion. External revenue reached just $293 million, mostly related to Altera.
Risks persist. Intel raised its 2026 capital expenditure target to $20 billion, up from an earlier forecast of $18 billion. The company posted a GAAP loss of $11.0 billion, largely due to a $12.5 billion mark-to-market charge related to government escrowed shares. The next test for the market arrives soon, with major cloud purchasers due to report this week, coinciding with the Federal Reserve's rate decision. Either event could alter expectations related to AI investment and funding.
Intel targets large-scale 14A output in 2028. Monday's steady performance suggests investors expect earnings support, but the company has yet to demonstrate that its foundry will deliver adequate returns. Cash generation has become more important than simply exceeding expectations.
