MSX U.S. Stock Daily Observation: Intel 2026 Q2 Earnings: AI Rekindles CPU Demand, Data Center Surges 59%

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Today's Observation

Intel posted its fastest revenue growth in over a decade this quarter, widely seen as a signal that the company's transformation is beginning to show results. The financial report showed a sizable GAAP net loss, but this did not stem from a deterioration in core operations. Instead, it was due to a non-cash accounting item: a portion of shares entrusted to the U.S. government under the CHIPS and Science Act. As the company's stock price rose sharply, the corresponding book liability expanded and was recognized in the current period's income statement, creating a book loss. In other words, the stronger the stock price, the larger this book loss becomes. Excluding this factor, the company was actually in a profitable position, and its operating profit turned from a loss to a gain.

What is more noteworthy this quarter is the clear recovery in the Data Center and AI business. Management stated that demand for server CPUs has exceeded supply and signed multiple long-term supply agreements during the quarter. This indicates that the current wave of AI is not only driving GPU demand but also rekindling demand for traditional CPUs, which is precisely Intel's home turf. Meanwhile, the company's guidance for the next quarter also exceeded market expectations.

However, the other side of the transformation remains unchanged: the foundry business continues to incur losses, capital expenditure remains high, free cash flow is negative, and management expects spending to increase further next year. Overall, the direction of improvement is clear, but whether the foundry business can achieve breakeven and when cash burn will subside remain key factors to monitor going forward.

Data in a Minute

• Revenue of $16.128 billion, +25% YoY, beating the $14.431 billion estimate; fastest growth rate since Q3 2011
• Adjusted EPS of $0.42, beating the $0.21 estimate; GAAP net loss of $11.033 billion, almost entirely from a $12.529 billion non-cash revaluation of "entrusted shares"
• Data Center and AI revenue surged +59% YoY, the biggest highlight of the quarter; management stated server CPU demand has "exceeded supply," signing 10 long-term supply contracts this quarter
• Client Computing revenue of $8.877 billion, +13% YoY; Foundry revenue of $5.765 billion, +31% YoY
• Q3 Guidance: midpoint revenue of $16.3 billion, adjusted EPS of $0.38, both significantly exceeding expectations
• Foundry operating loss still at $2.089 billion; high capital expenditure, adjusted free cash flow turned negative (-$8.419 billion); management expects 2027 capital expenditure to be higher than 2026

MSX View

The real story of this earnings report is not the GAAP loss. It is a non-cash accounting byproduct: the higher the stock price, the larger the book loss from the entrusted shares, unrelated to whether advertising, cloud, or CPU businesses are earning less. What truly reflects the health of core operations, and is sustainable and comparable, is the return to profitability on a Non-GAAP basis, the positive GAAP operating profit, and the growth rate of Data Center and AI: management explicitly stated that server CPU demand has "exceeded supply," signing 10 long-term contracts in one quarter. This shows that the AI wave is not only driving GPU but also re-igniting CPU demand, which is Intel's heartland. On the other hand, the foundry business still lost $2.089 billion in a single quarter, adjusted free cash flow was -$8.4 billion, and capital expenditure is set to increase in 2027. This indicates that the heavy investment in transformation is far from reaching its payoff stage. The story is improving, but the foundry's breakeven point and cash burn are the two most critical signals to watch next. In the short term, one should be cautious of a "buy the rumor, sell the news" pullback.

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Risk Warning: The macro economy and U.S. stock market are highly volatile. This content is for academic and research observation purposes of the Maitong Research Institute only and does not constitute any investment advice.