Intel Corporation (NASDAQ: INTC) closed Monday's regular trading session at $91.00, up 0.9%, as investors weighed robust growth in its data center and AI segment against ongoing challenges in its foundry business. The gain lagged the broader Nasdaq Composite, which advanced 2.1% on the day, reflecting a cautious market reception despite the company's upbeat AI narrative.
According to the company's latest quarterly report, the Data Center and AI (DCAI) division posted revenue of $6.262 billion, a 59% year-over-year increase, with operating income of $2.474 billion and a 40% operating margin. This surge was driven by strong demand for AI server chips, a key growth area that has captured investor attention.
However, the foundry segment continues to be a drag. Intel Foundry reported revenue of $5.765 billion in the second quarter, up 31% from a year ago, but recorded a massive operating loss of $2.089 billion, translating to a negative 36% operating margin. Alarmingly, only $293 million—just 5.1% of the segment's revenue—came from external customers. The vast majority of foundry output still serves Intel's internal product lines, underscoring the lack of widespread third-party adoption.
The foundry's operating loss amounted to a staggering 84% of DCAI's operating profit, highlighting the financial imbalance between the two segments. Although the loss margin improved from a 72% deficit a year ago to 36% this quarter, the company noted that more expensive 18A wafers reduced product profit by $340 million, indicating ongoing cost pressures.
Intel's third-quarter guidance offered a mixed picture. The company projects revenue of $16.3 billion at the midpoint, surpassing pre-release consensus by 7.9% but representing only a 1.1% sequential increase from the second quarter's $16.128 billion. Non-GAAP gross margin is expected to tick up slightly to 42.0%, while non-GAAP EPS is forecast at $0.38, down 9.5% from the prior quarter's $0.42.
Chief Executive Lip-Bu Tan emphasized that "AI is driving unprecedented demand for compute," and the company has raised its 2026 capital expenditure forecast to $20 billion, up from $18 billion. This increased investment underscores the need for continued foundry utilization and external customer wins to justify the spending.
Analysts remain cautious. Shay Boloor of Futurum Group noted that Intel must "convert the current data center shortage into sustained revenue growth" to achieve a re-rating. He also highlighted improvements in foundry economics and the need to secure more external customers as critical factors going forward.
Peer performance on Monday further illustrated Intel's relative underperformance. Advanced Micro Devices (NASDAQ: AMD) rose 1.7% to $484.64, NVIDIA (NASDAQ: NVDA) gained 2.9% to $206.64, and Taiwan Semiconductor (NYSE: TSM) edged up 0.5% to $406.11. These moves suggest investors are favoring companies with more direct exposure to AI chip demand and advanced foundry capabilities.
AMD is scheduled to report earnings after Tuesday's close, with a conference call at 5 p.m. EDT. Its server insights are expected to provide additional context on demand trends relevant to Intel's data center business.
Looking ahead, risks remain elevated. Continued component shortages could extend into next year, restricting shipments. Higher process costs may delay margin improvements, and competitive pressures, softer demand, trade restrictions, or setbacks in securing external foundry deals could all impact Intel's turnaround trajectory.
