Intel Shares Reach New All-Time High Following Strong Earnings Forecast

Intel Shares Reach Record High After Delivering Strong Sales Forecast

Intel Corp. shares surged to a record high after the chipmaker announced a sales forecast that surpassed Wall Street expectations, demonstrating its ability to benefit from the growing demand for Artificial Intelligence (AI) spending.

According to Intel's statement on Thursday, the company expects revenue to range from $13.8 billion to $14.8 billion in the June quarter, exceeding the average analyst estimate of $13 billion, as compiled by Bloomberg. This upbeat outlook suggests that Chief Executive Officer Lip-Bu Tan is making progress on his turnaround plan, which involves improving operations and delivering on promises to strengthen the company's balance sheet.

As a result of the strong forecast, Intel's stock soared 24% to $82.57 in New York trading on Friday, marking a record high since August 2000. This single-day percentage gain was the largest since October 1987, and it brought Intel's year-to-date increase to 124%.

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The federal government is also benefiting from the run-up, having acquired a stake worth about $8.9 billion in Intel under an unconventional deal brokered by the White House in August. The value of that holding has now grown roughly fourfold to around $36 billion.

The need for data center chips to power the massive AI expansion is driving demand for Intel's flagship Xeon server processors, which are a renewed focus for companies trying to turn their AI software into services that generate revenue. Friday's rally helped lift other chipmakers, including fellow CPU-focused companies like Advanced Micro Devices Inc. and Arm Holdings Plc. AMD stock rose 14%, while shares of Arm climbed 15%.

In an interview, Tan said Intel delivered a "solid result" that was ahead of its projections. He expects the strong demand for processors used in AI systems to expand and said the company is "laser-focused" on increasing output from Intel's factories, which still can't produce enough to fill all its orders.

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Intel has also been able to navigate another challenge the PC industry is facing: memory-chip shortages. Red-hot demand for server products has lured memory suppliers into concentrating on high-speed processors for those machines, cutting into production of standard products used in phones and personal computers. In addition to making progress on production, Tan has restored Intel's balance sheet via outside investments, allowing the company to buy back part of a factory in Ireland that it had been forced to sell to raise cash.

The company is now readying a bond sale to finance the repurchase, which was seen as a sign of future confidence by investors. Adding to the optimism, Tesla Inc. CEO Elon Musk said Wednesday that he will use Intel technology as part of his effort to build an in-house chip manufacturing plant. Tan declined to provide further details on the relationship.

Intel's second-quarter earnings are expected to be about 20 cents a share, excluding some items, which compares with a Wall Street prediction of 9 cents. In the first quarter, revenue rose 7% to $13.6 billion, and profit was 29 cents a share, excluding some items. Analysts had estimated sales of $12.4 billion and earnings of 1 cent, according to data compiled by Bloomberg.

Intel's gross margin, the percentage of revenue remaining after deducting the cost of production, was 41% in the quarter on an adjusted basis. The company predicted a margin of 39% in the current period.

Intel will spend more than originally budgeted on new production equipment, according to Chief Financial Officer Dave Zinsner. The company has plenty of factory space and will add more machines to fill it out, he said. Capital expenditures will now be about flat from where they were last year.

The Santa Clara, California-based company has a long way to go to restore its former chip-industry glory. Its annual revenue of $53 billion last year was roughly $25 billion shy of the company's peak revenue, achieved in 2021. Wall Street projects 3% growth in 2026.

The Intel Foundry Services division generated revenue of $5.4 billion, up 16%. The PC chip division had revenue of $7.7 billion, and the data center unit posted sales of $5.1 billion. All of those totals topped Wall Street estimates.

Tan said Intel is now a "fundamentally different company" than last year, when he became CEO. "A year ago, the conversation about Intel was about whether we could survive," he said. "Today, it's about how quickly we can add manufacturing capacity and scale our supply to meet the enormous demand for our products."