Intel Forecasts Second-Quarter Revenue Above Estimates

Intel forecasts second-quarter revenue above estimates, shares jump 15%

Intel’s Strong Financial Performance and AI Strategy

By Zaheer Kachwala, Max A. Cherney and Stephen Nellis

April 23 (Reuters) - Intel forecast second-quarter revenue above Wall Street expectations on Thursday, underscoring booming demand for the company's server processors used for artificial intelligence in data centers.

Shares of Intel surged 15% in extended trading, adding $49 billion to its market value and extending its 81% rebound so far this year.

The company expects revenue of between $13.8 billion and $14.8 billion, compared with an estimate of $13.07 billion, according to data compiled by LSEG. Intel’s second-quarter adjusted per-share profit guidance of 20 cents handily beat expectations of 9 cents a share.

Intel’s Revival Plan and Strategic Investments

After years of management blunders left the former icon of chipmaking without a meaningful foothold in the booming artificial-intelligence industry, CEO Lip-Bu Tan put a revival plan in place to shore up Intel's balance sheet through asset sales and layoffs.

Tan also secured large investments and struck deals with the U.S. government, SoftBank and Nvidia, giving Intel much-needed fuel to put into its manufacturing operations and inspire strong investor confidence in the firm's longer-term growth.

Emergence of New AI Opportunities

While Intel missed out on the early years of the AI boom, a new opportunity in the form of advanced central processing units (CPUs) has emerged as cloud providers shift from training models to deploying them.

Intel's CPU Opportunity

Renaissance of the CPU

"The CPU (is) having a renaissance here," finance chief Dave Zinsner said in an interview with Reuters. "We're starting to be a meaningful beneficiary of the AI investments that are happening."

While graphic processing units (GPUs) are used to process large-scale mathematical operations required to generate content, CPUs are better suited to handle workloads done by autonomous AI agents with reasoning capabilities.

Revenue Projections and Manufacturing Challenges

Part of the reason for the company’s optimistic revenue projection is that Intel has elected to raise prices on its chips in order to pay for the rising costs associated with producing more of them, Zinsner said in an interview.

However, Intel's ability to meet demand still depends on whether the company can continue to manufacture its processors at scale and without bottlenecks and supply issues.

Musk's Terafab Project Taps Intel

Major Win with Tesla and Terafab

Intel on Wednesday landed a win for its manufacturing business, securing Elon Musk's Tesla as its first major customer for the next-generation 14A process to make chips at its Terafab project, an advanced AI chip complex Musk has envisioned in Austin, Texas.

Zinsner declined to provide financial details about the arrangement with the Terafab project.

“I think the details of this partnership are still being worked between Lip-Bu and Elon," Zinsner said.

Long-term Outlook and Foundry Business

"The long-term trajectory for Intel is still a high-stakes gamble on its ability to transform from a legacy giant into a nimble foundry athlete that can legitimately challenge TSMC by 2030," said Michael Schulman, a partner at wealth management firm Cerity Partners. "If Intel successfully captures the silicon needs for the coming robotics and agentic AI boom, the current valuation may eventually be viewed as an enviable entry point for a diversified semiconductor powerhouse.”

The company's contract manufacturing business, or foundry, reported first-quarter revenue of $5.4 billion. Intel's own business accounted for most of the foundry revenue, save for less than $200 million which Zinsner described as "legacy business that we have mainly on the wafer side."

Data Center Revenue Exceeds Estimates

AI Partnerships and Revenue Growth

Intel earlier this month expanded its AI CPU partnership with Alphabet's Google, and joined Musk's Terafab AI chip complex project with SpaceX and Tesla to make processors powering robotics and data centers.

First-quarter revenue came in at $13.58 billion, beating estimates of $12.42 billion.

Revenue in the company's data center and AI segment came in at $5.1 billion, compared with estimates of $4.41 billion.

Competition and Financial Results

Competition in the CPU space remains high, as rivals Nvidia, Advanced Micro Devices and Arm also eye the market and roll out products to get ahead.

Intel reported a first-quarter loss per share of 73 cents as it incurred more than $4 billion in restructuring charges. On an adjusted basis, the company earned 29 cents per share, beating the estimate of 1 cent.

(Reporting by Zaheer Kachwala in Bengaluru and Max A. Cherney and Stephen Nellis in San Francisco; Additional reporting by Noel Randewich in San Francisco; Editing by Pooja Desai and Matthew Lewis)