Computer processor maker Intel (NASDAQ: INTC) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 7.2% year on year to $13.58 billion. On top of that, next quarter’s revenue guidance ($14.3 billion at the midpoint) was surprisingly good and 9.2% above what analysts were expecting. Its non-GAAP profit of $0.29 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Intel’s first quarter results were positively received by the market, with management attributing this to robust demand for its server CPUs and broad progress in advanced manufacturing. CEO Lip Bu Tan highlighted that persistent supply constraints, especially for Xeon server processors, were met with improved factory output and rapid production ramps of Intel 3–based Xeon 6 and 18A–based Core Series 3. The quarter also benefited from a better product mix, pricing actions, and strong growth in AI-driven businesses, which now represent a majority of revenue. CFO David Zinsner noted, “We delivered first-quarter non-GAAP earnings per share of $0.29 versus our guidance of breakeven on higher revenue, stronger gross margins, and continued spending discipline.”

Looking ahead, Intel’s guidance is supported by anticipated sustained demand for its CPUs in AI infrastructure and continuous improvements in manufacturing yields. Management expects sequential revenue growth driven by enhanced supply and further pricing actions, particularly in the Data Center and AI (DCAI) segment. CFO David Zinsner cautioned about potential cost headwinds from rising memory and substrate prices but emphasized ongoing efforts to expand gross margins through operational improvements. Lip Bu Tan added, “Our outlook for server CPU demand has improved over the last 90 days, and we expect a strong year of double-digit unit growth for the industry and for us, with momentum extending into 2027.”

Key Insights from Management’s Remarks

Management cited strong AI-related demand, advancements in manufacturing technology, and purposeful customer partnerships as pivotal to the quarter’s performance and positive forward outlook.

• AI infrastructure drives growth: Intel’s management emphasized that demand for AI-capable CPUs and related products is outpacing supply, largely due to the increasing role of CPUs in orchestrating AI workloads and inference tasks. The Xeon server line, especially, is experiencing “strong and sustained momentum,” supporting customer needs in both training and real-time AI applications.
• Advanced product ramp: The company launched its Intel 3–based Xeon 6 and 18A–based Core Series 3 processors, noted as the fastest volume ramp for new Intel products in five years. This rapid deployment is central to meeting customer requirements and catching up with industry demand.
• Foundry progress and partnerships: Intel Foundry reported increased customer backlog and made advances in 18A and 14A process nodes. The company highlighted new external engagements, including a partnership with SpaceX, xAI, and Tesla for TeraFab, aimed at rethinking process technology and manufacturing efficiency.
• Long-term agreements with key clients: Multiple long-term agreements (LTAs) were signed with major customers like Google, providing volume and pricing certainty. These agreements are structured for three to five years and are seen as mutually beneficial in securing supply and supporting AI infrastructure buildouts.
• ASIC and advanced packaging momentum: The ASIC business, which focuses on custom chips for specific workloads, nearly doubled revenue year-on-year. Advanced packaging services are experiencing rising demand, with management expecting this segment to contribute meaningfully to foundry revenue as the decade progresses.

Drivers of Future Performance

Intel’s guidance for the next quarter and beyond is shaped by AI infrastructure demand, manufacturing yield improvements, and evolving customer requirements.

• AI infrastructure as core driver: Management expects continued double-digit growth in server CPU units, fueled by expanding AI workloads such as inference and agentic (multi-agent) processing. The increasing use of CPUs in AI orchestration, as opposed to only GPUs, is broadening the total addressable market for Intel’s products and supporting higher volume commitments from customers.
• Manufacturing yield and supply expansion: Improvements in manufacturing yields—particularly on the 18A and 14A process nodes—are enabling Intel to ramp up supply and meet robust order patterns. However, the company acknowledged ongoing supply constraints, with demand still outstripping output, and highlighted the importance of flexible capacity planning, including both internal and external foundry partners.
• Gross margin and cost management risks: While Intel is targeting gross margin expansion through a better product mix and operational efficiencies, management warned that rising input costs for memory and substrates could present headwinds, especially in the second half of the year. Continued investment in capacity and inflationary pressures are expected to keep operating expenses higher than originally targeted.

Catalysts in Upcoming Quarters

Looking forward, the StockStory analyst team will be monitoring (1) sustained growth and customer adoption in Intel’s AI-capable server and client CPU lines, (2) continued progress and commercialization milestones for 18A and 14A manufacturing nodes, and (3) the execution and economic impact of new long-term agreements and foundry partnerships. Developments in advanced packaging and the ramp-up of capacity for both internal and external customers will also be key areas to track.

Intel currently trades at $80.06, up from $66.68 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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