TLDRs
- Intel’s 160% rally faces its biggest test as second-quarter earnings approach.
- Rising revenue continues, but shrinking margins and foundry losses remain key concerns.
- Strong AI and data center demand supports growth despite manufacturing investment pressures.
- Investors are watching whether Intel’s costly foundry strategy can begin delivering sustainable profits.
Intel Corporation (NASDAQ: INTC) heads into one of its most closely watched earnings reports of the year after an extraordinary 160% stock rally in 2026.
While the semiconductor giant has dramatically outperformed the broader market, investors are now shifting their focus away from share price momentum and toward a more pressing question, whether Intel’s expensive manufacturing ambitions are beginning to generate meaningful profits.
The stock closed Friday at $95.04, down 2%, as semiconductor shares endured their weakest week in more than a year. Despite the recent pullback, Intel remains one of the strongest-performing large-cap technology companies this year, significantly outperforming both the S&P 500 and the broader semiconductor sector.
Revenue Growth Faces Margin Pressure
Wall Street expects Intel to report another quarter of higher revenue when it announces second-quarter results later this week. Based on the company’s previous guidance, revenue is projected to reach roughly $14.3 billion, representing modest sequential growth from the first quarter.
However, higher sales alone may not be enough to satisfy investors.
The company’s outlook suggests profitability is weakening even as revenue improves. Intel previously guided for a lower non-GAAP gross margin of approximately 39%, compared with 41% in the first quarter. Adjusted earnings per share are also expected to decline to around $0.20, down from $0.29 reported previously.
The disconnect between rising sales and falling profitability highlights the enormous costs associated with Intel’s ongoing manufacturing transformation. While demand across several business segments remains healthy, expanding production capacity continues to weigh heavily on financial performance.
Foundry Business Remains Costly
Intel’s foundry division remains the largest obstacle to stronger earnings growth.
During the first quarter, the manufacturing segment reported an operating loss exceeding $2.4 billion, with losses continuing to expand even as foundry-related revenue increased year over year. Much of that revenue comes from internal Intel business units rather than external customers, making it difficult to judge how quickly the contract manufacturing strategy is gaining traction in the broader market.
The company has spent billions building advanced fabrication facilities while competing against established contract chip manufacturers. Those investments are expected to continue pressuring operating margins throughout 2026.
Investors are expected to closely examine management’s latest comments regarding factory utilization, external customer demand, and the timeline for reducing foundry losses.
AI Business Continues Expanding
Despite manufacturing challenges, Intel continues benefiting from robust demand across its higher-growth businesses.
Its Data Center and AI division posted strong growth during the previous quarter, reflecting continued enterprise investment in artificial intelligence infrastructure. Overall product revenue also increased as commercial customers upgraded computing platforms.
Chief Financial Officer David Zinsner previously described customer demand for silicon as unprecedented, noting that Intel has been optimizing its manufacturing network to increase production capacity.
Those comments have reinforced optimism that demand remains healthy across enterprise computing, AI servers, and next-generation processors, even as broader semiconductor stocks experience increased volatility.
18A Progress Under Spotlight
Another major focus during Thursday’s earnings report will be Intel’s progress with its advanced 18A manufacturing process.
Recent updates from semiconductor equipment supplier ASML indicated that Intel has already begun delivering selected Panther Lake processors manufactured using High-NA EUV technology. The company also reported encouraging production yields comparable to existing industry-leading systems, offering investors greater confidence that Intel’s next-generation manufacturing roadmap remains on schedule.
At the same time, Intel continues making significant capital investments to expand production capacity worldwide. The company recently announced a €5 billion expansion of its Ireland manufacturing operations, with much of the spending expected before the end of 2027. The project represents a substantial portion of Intel’s planned capital expenditures this year.
While these investments could strengthen Intel’s long-term competitive position, they also increase pressure on management to demonstrate improving financial returns.
As Intel prepares to report quarterly results, investors will likely focus less on headline revenue and more on profitability metrics, including gross margins, foundry losses, and updates on external manufacturing customers. A revenue beat alone may not be sufficient to justify the stock’s remarkable rally if manufacturing costs continue weighing on earnings.
With shares already pricing in considerable optimism, this week’s earnings report could determine whether Intel’s impressive 2026 advance has further room to run or whether investors begin demanding clearer evidence that its ambitious foundry strategy can translate into sustained profits.
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