Does Intel's Revenue Growth Signal a Turnaround in Its Fortunes?

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Data Center Growth Remains a Key Catalyst

Intel’s Data Center and AI (DCAI) business is emerging as a major growth driver. DCAI revenues surged 59% year over year to $6.3 billion in the second quarter, benefiting from healthy hyperscale and enterprise demand.

The proliferation of generative AI applications is driving significant investments in data center infrastructure. Although GPUs remain at the center of AI computing, CPUs continue to play an important role in supporting AI workloads. This is creating incremental opportunities for Intel’s Xeon portfolio. The momentum is encouraging as AI-related infrastructure spending is likely to remain healthy, providing Intel with an opportunity to capitalize on rising compute requirements.

Client Computing Business Gains Momentum

Intel is also witnessing improving trends in its client computing business. Client Computing and Physical AI Group revenues totaled $8.9 billion in the second quarter, increasing 15% sequentially. The rising adoption of AI-enabled PCs represents an important growth opportunity. AI PC revenues increased 26% sequentially and accounted for roughly two-thirds of Intel’s client revenues during the quarter.

Intel is ramping Panther Lake and Wildcat Lake products based on its advanced 18A process technology. Increasing adoption of these products, coupled with an eventual enterprise PC refresh cycle, should support the client business over the long run. The company is also expanding its presence in edge computing and physical AI applications, including robotics. These emerging markets could broaden Intel’s addressable opportunity beyond traditional PCs.

Improving Manufacturing Execution Bodes Well

Improving manufacturing execution is another positive for Intel. Demand for its products remains strong, with supply constraints limiting the company’s ability to fully satisfy customer requirements. The company is increasing wafer output across Intel 7, Intel 3 and Intel 18A to address the demand. Improving yields and cycle times are helping boost production while lowering manufacturing costs.

The progress of Intel 18A is particularly encouraging. Output from the process exceeded the company’s internal target during the second quarter and increased sharply on a sequential basis. Intel’s ability to consistently execute on advanced process nodes remains crucial to its turnaround. Better manufacturing execution should strengthen the competitiveness of its product portfolio while supporting gross-margin expansion over time.

Price Performance

Intel has gained a stellar 347.1% over the past year compared with the industry’s growth of 29.1%, outperforming peers like Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA. While NVIDIA stock is up 18.8%, Advanced Micro has gained 168.4% over this period. 

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Estimate Revision

Earnings estimates for Intel for 2026 have moved up 116.2% to $1.47 over the past year, and the same for 2027 has increased 38.3% to $1.95. The positive estimate revision depicts bullish sentiments for the stock.

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INTC Growth Hurt by Operating Risks

Despite the uptrend, Intel has been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. This has affected its margins. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. An accelerated ramp-up of AI PCs has adversely impacted Intel’s margins, as it shifted production to a high-volume facility in Ireland, where wafer costs are typically higher. Competitive pricing pressure from rivals has further dented its profitability.  

China accounted for more than 24% of Intel's total revenue in 2025, making it the company's second-largest market after the United States. However, the communist nation's purported move to replace U.S.-made chips with domestic alternatives significantly affected INTC’s revenue prospects. The directive to phase out foreign chips from key telecom networks by 2027 underscores Beijing's accelerating efforts to reduce reliance on Western technology amid escalating U.S.-China trade and tariff tensions.

As Washington tightens restrictions on high-tech exports to China, Beijing has intensified its push for self-sufficiency in critical industries. This shift poses a dual challenge for Intel, as it faces potential market restrictions and increased competition from domestic chipmakers. In addition, weaker spending across consumer and enterprise markets, especially in China, resulted in elevated customer inventory levels.

End Note

Intel's innovative AI solutions hold immense promise for the broader semiconductor ecosystem. By addressing the challenges of scalability, performance and interoperability, it is paving the way for widespread AI adoption across enterprises worldwide. Management is focusing on simplifying parts of its portfolio to unlock efficiencies and create value. Significant capital infusion to revive its lost glory is likely to spur growth. All these efforts appear to resonate well, as exhibited by an uptrend in the stock price performance and rising earnings estimates.

However, margin woes amid strict export restrictions, unfavorable product mix and elevated customer inventory levels weigh on its bottom line. With a Zacks Rank #3 (Hold), Intel appears to be treading in the middle of the road, and investors could be better off if they exercise caution and stay invested for long-term gains. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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