Intel's 25% revenue surge puts foundry execution to the test — Intel's Q2 results showed its strongest revenue growth in 15 years, but the company's long-term valuation depends on whether it can finally deliver on its foundry strategy after years of manufacturing missteps.
Intel's 25% revenue jump to $16.1 billion and a 59% surge in data center sales confirm its AI-driven turnaround is gaining traction, yet the company's foundry business — still losing $2.1 billion a quarter — remains the decisive factor for its long-term valuation.
"The upside depends on whether Intel can execute its foundry strategy after decades of missteps," Doug O'Laughlin, analyst at SemiAnalysis, said. He argued that Intel's domestic manufacturing footprint gives it scarcity value as the only US-based company spanning chip design through fabrication.
Intel's Data Center and AI Group generated $6.3 billion in revenue, up 59% from a year earlier, with operating margins expanding to 39.5% from 16.1%. The foundry segment narrowed its operating loss to $2.1 billion from $3.2 billion a year ago, though its negative 36.2% margin underscores the distance to profitability. The company guided third-quarter revenue of $15.8 billion to $16.8 billion, above the $15 billion consensus, and raised 2026 capital spending to more than $20 billion.
Intel shares traded at $103.68 in after-hours trading, up 3.4% from the $100.10 close, but remain well below the 52-week high of $142.35. The stock's path higher depends on Intel converting its $20 billion-plus annual capital spending into competitive products and external foundry revenue, a process that O'Laughlin said could take years to materialize.
O'Laughlin warned against abandoning Intel's Ohio cleanroom campus, where the company is building a $28 billion semiconductor manufacturing site near Columbus. The first fab is expected to be completed in 2030, with operations starting between 2030 and 2031. "Intel doesn't have a wafer foundry future without Columbus," he said, adding that the company should announce more external customers over time, including potential interest from Apple Inc., Microsoft Corp. and Amazon.com Inc.
Intel's 18A process node has successfully ramped to production with improving yields and cycle times, addressing previous concerns about manufacturing execution. The company confirmed that 14A risk production is scheduled for the second half of 2027, with high-volume manufacturing targeted for 2028. EMIB-T advanced packaging technology is expected to ramp in 2027, supporting demand for heterogeneous integration in AI and high-performance computing applications.
The competitive landscape remains intense. Advanced Micro Devices Inc. has gained share in server processors, while Nvidia Corp. dominates AI infrastructure through its GPU ecosystem. O'Laughlin said Intel's smaller base in data center and AI gives it more room for upside than larger AI leaders, but the company must prove it can deliver for the customers it has already won before attracting broader foundry interest.
Intel's valuation — trading at a premium to its historical multiples on current earnings — reflects investor expectations for margin recovery if the foundry strategy succeeds. The company's non-GAAP gross margin of 41.8% has improved 12.1 percentage points from a year ago but remains far below Taiwan Semiconductor Manufacturing Co.'s 68% margins, highlighting the gap Intel must close. Benchmark's Cody Acree said Intel's valuation looks stretched versus its history, but that is secondary while the company remains early in its turnaround and investors wait for proof from foundry, PCs, servers and AI infrastructure.
This article is for informational purposes only and does not constitute investment advice.
