Intel Q2 Earnings Upcoming: AI Is Redefining CPU Value, Why Wall Street Is Betting This Time Is Different?

In the first quarter, Intel delivered a significantly improved scorecard.

The company posted revenue of $13.6 billion, up 7% year-over-year, exceeding its own guidance for the sixth consecutive quarter; Non-GAAP earnings per share reached $0.29, up from $0.13 in the same period last year; adjusted net profit increased by more than 150% year-over-year, and the operating margin also rose from 5.4% to 12.3%, indicating that its ongoing cost-reduction and efficiency-enhancement initiatives are beginning to reflect in its bottom line.

Meanwhile, R&D and administrative expenses fell 9% year-over-year, indicating that management's strategies to cut costs and flatten the organizational structure have already begun to take effect.

For the second quarter, the company's official guidance projects revenue of $13.8 billion to $14.8 billion, with a midpoint of $14.3 billion; Non-GAAP gross margin is expected to be approximately 39%, and adjusted EPS is projected at around $0.20.

However, what Wall Street is truly focused on now has long ceased to be whether Intel can meet its own guidance.

Most analysts believe that the company meeting consensus market expectations has already been largely priced in by the stock; more importantly, management must prove whether demand growth driven by AI is continuously translating into higher-quality revenue, rather than just relying on an increase in product sales volume.

If the data center business continues to grow rapidly, but the gross margin remains stagnant at around 39%, the market may believe that the incremental revenue is still being consumed by manufacturing costs, supply chain pressures, and product mix.

Only when Xeon server CPU pricing, product mix, and margins improve in tandem will capital markets believe that the recovery in CPU demand has truly entered the stage of earnings realization.

Notably, Intel still recorded a GAAP net loss of $3.7 billion in the first quarter, primarily due to charges related to ongoing restructuring. This means that the current valuation is essentially a bet on the rapid release of future earnings, rather than a value investment built on current cash flows.

Over the past few years, the market has virtually taken for granted that GPUs are the sole beneficiaries of the AI era, but this perception is changing.

As AI applications gradually shift from model training to inference, and further evolve into Agentic AI (agents), the computing paradigm across the entire data center is beginning to change.

Compared with the training phase, which primarily relies on GPUs to perform matrix calculations, agents require continuous code execution, database access, tool invocation, task scheduling, network communication, and multi-threading management—tasks that rely more heavily on CPUs.

Consequently, CPUs are once again becoming a core resource in AI servers. Citing industry data, Tom's Hardware reported that the configuration ratio of CPUs to GPUs in AI servers has gradually risen from approximately 1:8 in the past to 1:4, and with the further popularization of agentic applications, this ratio could even approach 1:1 in the future.

This means that with every new GPU cluster added, more server CPUs are typically required, directly boosting demand for the Xeon platform while improving product pricing power.

This trend has already begun to reflect in Intel's operating data. In the first quarter of this year, the company's Data Center and AI business revenue reached $5.1 billion, up 22% year-on-year, significantly higher than the roughly 1% growth rate of its traditional PC business.

Meanwhile, Nvidia's next-generation DGX Rubin NVL8 server platform adopts Xeon 6 as its primary processor; Google has also announced plans to further expand the use of Intel CPUs in its cloud computing infrastructure and to co-develop custom chip solutions.

While these partnerships may not immediately generate explosive revenue, they indicate that Intel is successfully re-entering the core supply chain of AI data centers.

While the CPU business has shown signs of improvement, foundry remains Intel's biggest variable for the future.

In the first quarter of this year, Intel Foundry generated approximately $5.4 billion in revenue, up 16% year-on-year. However, over $5.2 billion of this came from internal orders, with actual revenue from external customers remaining very limited. Meanwhile, the segment's operating loss reached $2.4 billion, widening further from the same period last year.

Therefore, the foundry business is currently still in an investment phase rather than a profitable one. What can truly shift market expectations is whether the 18A process can successfully transition to mass production.

In June this year, Intel announced that 18A-P had entered risk production, stating that compared to 18A, it can deliver a 9% performance improvement at the same power level, or an 18% reduction in power consumption at the same performance level.

However, there remains a significant gap between risk production and achieving stable mass production.

Currently, most market news regarding 18A yield improvements stems from supply chain surveys rather than official company disclosures. Therefore, during this earnings call, management's latest updates on yields, customer tape-out progress, mass production timelines, and the pace of capacity ramp-ups are highly likely to have a greater impact on the stock price than quarterly profits.

Meanwhile, the company's recent announcement of a €5 billion investment to expand its Leixlip manufacturing facility in Ireland—aimed at boosting Xeon series capacity—indicates that management continues to double down on advanced manufacturing capabilities.

However, such investments also mean that capital expenditure pressure will remain elevated in the short term. Therefore, for Apple ( AAPL ), Tesla ( TSLA ), xAI, and SpaceX ( SPCX) and other potential clients, the market should view them more as long-term options rather than immediately realizable revenue sources.

Only when external orders, wafer utilization rates, and operating losses show sustained improvement will the foundry business truly be capable of driving valuation expansion.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.