Intel Shares Fall Further as Investors Scrutinise AI Revenue Growth

Intel ended Tuesday at $86.30, falling 5.86% with 154.35 million shares traded. The PHLX Semiconductor Index dropped 4.5%, indicating widespread sector weakness. Investors are raising doubts about whether significant spending on AI infrastructure will support sustained chip growth. Intel remains roughly 39% lower than its June peak of $142.35. The decline signals concerns over sector risk and valuation, rather than a drop in reported demand. Investing.com

Revenue totaled $16.13 billion, up 25.4%, exceeding guidance by $1.8 billion. Adjusted EPS came in at $0.42, compared to guidance of $0.20 and a consensus near $0.21. Adjusted gross margin hit 41.8%, surpassing guidance by around 280 basis points. GAAP operating income stood at $1.80 billion, reversing a $3.18 billion loss from the prior year. Outperformance was broad-based. Intel Corporation

A $12.53 billion mark-to-market charge accounted for the bulk of the loss. This charge is linked to escrowed shares as part of Intel’s agreement with the U.S. government and is non-cash. On a non-GAAP basis, quarterly net income totaled $2.2 billion. However, analysts say investors should still consider its impact. At the end of the quarter, 143 million escrowed shares had yet to be released, each subject to various conditions. The corresponding derivative liability stood at $15.6 billion, which may contribute to accounting swings in future quarters. Intel Corporation

Intel forecast revenue in the range of $15.8 billion to $16.8 billion, with a midpoint of $16.3 billion. That figure represents an increase of roughly 19% from the third quarter of the previous year. The company projected adjusted earnings per share at $0.38, compared to a consensus of $0.27 prior to the report. Adjusted gross margin is expected at 42.0%, a slight improvement from the 41.8% posted in Q2. Nonetheless, the forecasted EPS is around 10% lower than Q2’s $0.42. The ramp-up in server supply remains concentrated toward the end of Q3 and into Q4. Intel Corporation

Management reported that AI-related businesses generated approximately 70% of revenue for the quarter and expanded over 70% compared to a year ago. DCAI revenue jumped 59% to reach $6.26 billion, surpassing forecasts. DCAI’s operating profit totaled $2.47 billion, resulting in a 39.5% margin for the segment. Revenue from purpose-built silicon was almost three times higher than the prior year. At present, supply remains the chief limitation. Intel Download Center

CCPG revenue increased 13% to $8.88 billion, delivering an operating profit of $2.34 billion. The segment achieved an operating margin near 26%. AI PC revenue rose 26% quarter-over-quarter, accounting for two-thirds of client revenue. Intel anticipates PC consumption in 2026 will decline in the low double digits. Higher memory costs and constraints on components pose significant risks in the second half. Client unit volumes dropped, but average selling prices climbed due to a stronger product mix. Intel Corporation

Foundry revenue climbed 31% to $5.77 billion in the second quarter. Operating loss was reduced to $2.09 billion from $3.17 billion. External foundry sales reached just $293 million, accounting for about 5% of the segment’s revenue. The bulk of foundry revenue continues to be generated by Intel’s internal product businesses. Intel aims for 14A risk production in late 2027 and expects volume ramps in 2028. Customer engagement is on the rise, though large-scale external demand has yet to be demonstrated. Intel Corporation

Intel lifted its 2026 capital expenditure forecast to more than $20 billion and projects a notable increase for 2027. At the end of June, the company reported $29.73 billion in cash and short-term investments. Total debt stood at $50.54 billion compared to $46.59 billion in December. Operating cash flow for the first half totaled $8.10 billion, up from $2.86 billion a year earlier. Intel maintains a $10 billion credit facility. No equity offering is currently authorized, though management has not dismissed the possibility.

Intel ended Tuesday with a market capitalization near $435 billion. Due to negative trailing earnings, the GAAP price-to-earnings ratio does not have meaning. Using the Q3 revenue midpoint of $16.3 billion on an annualized basis translates to about 6.7 times sales. Annualized adjusted EPS of $0.38 equates to around 57 times earnings. These run-rate figures are not comprehensive Wall Street forecasts. The current valuation assumes significant growth ahead and considerable improvement in the foundry business. MarketWatch

Microsoft and Meta are set to report on Wednesday, with Amazon following on Thursday. The AI investment outlooks from these companies will challenge Intel’s expectations for server demand. The Federal Reserve will announce its policy decision on Wednesday at 2 p.m. Eastern. Guidance on rates remains important as Intel continues to trade at an elevated earnings run-rate. Keep an eye on the PHLX Semiconductor Index after its 4.5% drop on Tuesday. With Intel having reported results last week, broader semiconductor sector movements take precedence. Microsoft