Intel's second-quarter revenue hits a 15-year high, but cash flow is under pressure

Intel announced its second-quarter financial report for the period ending June 2026, with revenue and profits far exceeding market expectations. AI-related business has become the core engine of growth, with revenue from the Data Center and AI division increasing by 59% year-on-year. However, due to non-cash accounting losses under GAAP standards, the company recorded a net loss of $11 billion, and adjusted free cash flow was also negative.

The financial report shows that revenue for the quarter reached $16.1 billion, a year-on-year increase of 25%, marking the strongest quarterly growth since 2011, and nearly $2 billion higher than the consensus analyst expectation of $14.4 billion. Under Non-GAAP standards, net profit was $2.2 billion, with earnings per share of $0.42, achieving a turnaround and approximately double the market expectation. Gross margin significantly increased to 41.8%, up 12.1 percentage points from the same period last year.

Overall, AI-related business grew by more than 70% year-on-year, contributing nearly 70% of total revenue. Revenue from the Data Center and AI division (DCAI) was $6.3 billion, a year-on-year increase of 59%, marking the strongest quarterly growth in server business history. Management stated that as AI applications evolve from training to autonomous agents, demand for general-purpose CPUs has significantly increased, with the Xeon 6 series processors becoming one of the fastest-selling products in the company's history. Revenue from Client Computing and Physical AI Group (CCPG) was $8.9 billion, a year-on-year increase of 13%; revenue from foundry services (Intel Foundry) was $5.8 billion, a year-on-year increase of 31%, but operating losses still reached $2.089 billion.

Despite significant improvements in core operations, the company's GAAP net loss of $11 billion primarily stemmed from a $12.5 billion non-cash fair value loss related to shares held in trust by the U.S. Department of Commerce, which increased due to rising stock prices. Additionally, due to a net outflow of $12.2 billion from partner funding, adjusted free cash flow was -$8.4 billion.

As customer demand continues to exceed supply capacity, the company has raised its full-year capital expenditure forecast for 2026 from the previous $18 billion to over $20 billion, and has indicated that capital expenditures in 2027 will be significantly higher than in 2026, with the majority directed towards domestic manufacturing networks in the U.S. The company expects third-quarter revenue to be between $15.8 billion and $16.8 billion, with adjusted earnings per share expected to be $0.38, both exceeding analyst expectations