After a 185% rally, Intel must prove the turnaround is real
Earnings are expected to show the fastest sales growth in six years, with investors focused on AI demand, foundry momentum and profitability.
Intel will report second-quarter earnings on Thursday under mounting pressure to prove that the dramatic recovery in its share price is supported by an equally strong improvement in its business.
The U.S. chipmaker has emerged as one of Wall Street's biggest surprises this year, with its stock still up about 185% despite retreating more than 25% from its record closing high in June. Investors have increasingly embraced CEO Lip-Bu Tan's turnaround strategy, while surging demand for artificial intelligence infrastructure has revived Intel's core processor business and fueled optimism about contract manufacturing ambitions.
Analysts expect Intel to post its fastest quarterly revenue growth in roughly six years. According to LSEG consensus estimates, revenue is forecast to rise 12.1% year over year to $14.42 billion, while adjusted earnings are expected to reach 21 cents per share.
Much of that growth is expected to come from the company's Data Center and AI Group, which analysts project will generate $5.37 billion in revenue, up 36.4% from a year earlier. The business has become one of Intel's strongest performers as cloud providers increasingly deploy CPUs alongside AI accelerators to support inference workloads and AI agents.
The division's strength comes despite Intel recently expanding layoffs into the Data Center and AI Group as part of a broader restructuring. The company has been reducing its workforce under Tan's plan to streamline operations, with the cuts reaching even one of Intel's fastest-growing businesses as management prioritizes efficiency alongside growth.
Beyond the quarterly numbers, investors will be looking for evidence that Intel's foundry strategy is beginning to gain meaningful commercial traction.
One of the biggest unanswered questions remains a potential manufacturing agreement with Apple that U.S. President Donald Trump announced in April but that neither company has publicly confirmed. Such a deal would represent a major endorsement of Intel Foundry, strengthening both its order book and its credibility as a contract chip manufacturer. Investors are also expected to seek updates on other potential customers following Intel's previously announced manufacturing agreement with Tesla.
Despite improving sentiment, Intel's recovery remains incomplete.
Demand for personal computers continues to lag historical levels, while the company's manufacturing investments continue to weigh on profitability. Analysts expect Intel's adjusted gross margin to reach 38.8% in the second quarter, well below the levels the company historically generated before embarking on its multibillion-dollar foundry expansion.
Last quarter, Intel benefited from unusually tight semiconductor supply, allowing it to sell inventories of older and lower-performance processors that had previously been expected to remain unsold. Investors will now be watching whether demand remains robust enough to sustain growth without those one-off tailwinds.
"We admit to feeling better about the company than we have in some time as both the market and narrative grow more supportive, though fundamentals overall still remain somewhat on the challenging side," Bernstein analysts wrote in a recent note.
Thursday's results are therefore likely to be viewed as a key test of whether Intel's improving narrative can continue to outpace the operational challenges that still confront the company. If the company delivers strong growth while demonstrating continued momentum in its foundry business and AI-related demand, investors may conclude that the turnaround has moved beyond optimism and into execution. If not, questions are likely to resurface over whether the stock's remarkable rally has run ahead of the fundamentals.
Reuters contributed to this report.
