July 23 (Reuters) - Intel forecast quarterly profit and revenue above estimates on Thursday, pushing its shares up 10% in after-hours trade, and boosted spending plans over the next two years as an AI data center buildout increases demand for its central processing units (CPUs).
The company expects third-quarter revenue between $15.8 billion and $16.8 billion, compared with analysts' average estimate of $15.1 billion, according to data compiled by LSEG. Adjusted profit is expected to be 38 cents per share, compared with analyst estimates of 27 cents.
Intel is benefiting from a boom in what is known as agentic AI, where autonomous agents carry out tasks such as computer coding on behalf of human users. Its shares have declined more than 25% from a record close on June 22 amid a broader selloff in chip stocks, though shares remain up more than 170% for the year.
The results vindicate CEO Lip-Bu Tan's costly strategy to regain technology leadership and compete with rivals like Nvidia and AMD in the booming market for AI chips. Investors are closely watching Intel's data center and contract manufacturing, or foundry, businesses as key indicators of the turnaround's success.
On a conference call with analysts on Thursday, Tan said developments during the second quarter prompted Intel to become "fully committed" to high-volume production of chips made with its forthcoming 14A manufacturing technology in 2028. Last year, Intel had warned it might be forced to abandon development of 14A technology if it could not find a major customer, which would have effectively put the U.S. out of the race to make the world's fastest chips.
"I'm pleased to see the increasing momentum on customer engagements for Intel 14A, and I'm increasingly confident that the 14A will be highly competitive process," Tan said.
For the second quarter ended June 27, Intel said sales rose 25.4% to $16.13 billion and adjusted profit was 42 cents per share, compared with estimates of $14.42 billion and 21 cents per share. Adjusted gross margin came in at 41.8%, compared with estimates of 38.8%.
AGENTIC AI DRIVES CPU DEMAND SURGE
The shift toward AI agents has driven a resurgence of demand for data center CPUs, with Intel's leaders saying earlier this year that it caught them off guard, with demand outstripping the company's ability to manufacture the CPU chips.
In an interview, Chief Financial Officer David Zinsner told Reuters that booming demand has prompted Intel to raise its capital expenditure forecast for this year from $18 billion to $20 billion. Zinsner also said Intel expects capital expenditures to be "up meaningfully next year" as well.
"That's signaling the confidence around the growth opportunities for the business," Zinsner said.
He also said that Intel has signed a range of long-term agreements with customers for data center CPUs and specialized chips called XPUs. He said the agreements range from three to five years and that some contain both chip volume and price commitments and some contain only volume commitments. But Zinsner also said Intel would remain disciplined about spending.
"You can't completely hang your hat on (long-term agreements) because when things change, a lot of times things get renegotiated," he said. However, "they're not signing those unless they have real confidence around what they're going to invest." He added: "It gives us a pretty good confidence around what we should be planning in terms of output."
Zinsner said Intel has about $30 billion in cash and a $10 billion line of credit but that a share sale, while currently not authorized, is not out of the question.
"I wouldn't dismiss the possibility that we would do that. But no specific plans at this point," he said.
For Intel’s data center and AI business, Intel said second-quarter revenue was $6.26 billion, compared with estimates of $5.37 billion.
Also in extended trade, rival chipmakers Arm Holdings and Advanced Micro Devices rallied more than 3% each, and along with Intel they created over $100 billion in stock market value.
Intel said sales in its laptop and desktop segment were $8.88 billion in the second quarter, compared with estimates of $7.89 billion.
Zinsner said that in the company’s laptop and desktop business, unit sales were down but average prices were up as Intel shifted away from supplying lower-cost chips for entry-level machines and back to chips for higher-end devices.
CONTRACT MANUFACTURING GAINS TRACTION
Intel’s foundry business had $5.77 billion in second-quarter sales, compared with analyst estimates of $5.55 billion.
The unit secured Elon Musk's Tesla as a customer for its next-generation 14A process for the "Terafab" AI chip project, bolstering confidence in Intel's efforts to land major buyers.
Expectations of another high-profile win rose in April after U.S. President Donald Trump announced that Apple had agreed to make processors with Intel. Neither company has confirmed the deal.
"There have been lingering questions ever since Lip-Bu Tan took over, and it put a cloud of uncertainty around the foundry business," said Bob O'Donnell, CEO of TECHnalysis Research. "All those clouds are now removed.”
(Reporting by Anhata Rooprai in Bengaluru and Stephen Nellis and Max A. Cherney in San Francisco; Additional reporting by Noel Randewich in San Francisco; Editing by Sayantani Ghosh and Matthew Lewis)
