Intel Corporation (NASDAQ:INTC) reported second quarter revenue of $16.13 billion, up 25% year on year and its fastest growth in more than fifteen years, beating Wall Street consensus near $14.42 billion, while posting a net loss of $11 billion. The loss was driven by a $12,529 million mark-to-market charge on 159 million escrowed shares held under Intel's CHIPS Act Secure Enclave agreement with the US Department of Commerce. Adjusted earnings reached $0.42 a share against $0.21 expected, and non-GAAP gross margin hit 41.8%, above management's roughly 39% guide, as shares closed Thursday at $100.23 and traded as high as $112.70 after hours.
Data Center Business Drives 59% Year-on-Year Revenue Growth
Data Center and AI revenue reached $6.3 billion, up 59% year on year and roughly 24% from the first quarter, as demand for server processors outstripped what Intel could supply. Client Computing and Physical AI contributed $8.9 billion, up 13%, taking total product revenue to $15.1 billion. Management said on the earnings call that AI-driven businesses collectively grew more than 70% year on year and now account for around 70% of revenue. Chief Executive Lip-Bu Tan attributed the quarter to execution rather than cycle, saying the results reflected "greater speed, accountability, and customer focus." Intel guided third-quarter revenue to $15.8 billion to $16.8 billion against estimates near $15.01 billion, with non-GAAP EPS of $0.38 against $0.24 expected.
Mark-to-Market Accounting on Escrowed Shares Creates $12.5 Billion Charge
Intel reported a net loss of $11.0 billion, or $(2.16) a share, driven by a $12,529 million mark-to-market charge on what the company calls Escrowed Shares. Those are 159 million shares held in escrow for the US Department of Commerce under Intel's CHIPS Act Secure Enclave agreement, released as Intel performs and receives federal disbursements, priced at $20.00 a share. Intel classified them as a derivative liability carried at fair value, so movements flow through the income statement. The liability is roughly 158.7 million shares multiplied by the gap between Intel's share price and the $20.00 strike, which means about $1.6 billion flows through GAAP earnings for every $10 the stock moves in a quarter. The $12.5 billion charge implies a move of roughly $79 across the three months to 27 June. On a non-GAAP basis Intel earned $2.2 billion, with operating cash flow of $7.0 billion.
Intel Foundry External Revenue Reaches $293 Million, Names Fortinet as Customer
Intel Foundry revenue was $5.8 billion, up 31%. External revenue was $293 million, up from $174 million the previous quarter, a 68% sequential increase. Almost everything the foundry produces still goes to Intel. Yields on the 18A node have reached roughly 85%, up from 65% a quarter earlier, against TSMC's N2 at around 90%. Apple and Microsoft are confirmed design partners, and Intel Foundry named Fortinet as an external customer on 23 July, hours before the results, its first publicly named commercial engagement. Chief Financial Officer Dave Zinsner raised 2026 capital spending from $18 billion to $20 billion, with a meaningful increase signaled for 2027.
Shares Surrender Most After-Hours Gains Amid Negative Free Cash Flow
Adjusted free cash flow was negative $8.4 billion. Shares popped 12.4% after hours and surrendered most of the gain, trading around $102.53 in Friday's pre-market. A comparable first-quarter beat produced a 23.6% move on the day. Mizuho cut its target from $135 to $109 while keeping a Neutral rating; Wells Fargo raised its target from $110 to $120 at Equal-Weight. Wall Street entered the print on a Hold consensus of 22 holds, 10 buys and two sells, with targets running from $65 to $200. The backdrop is a semiconductor index in a bear market, down 22% from its high.
FAQ
What did Intel report for Q2 revenue and earnings?
Intel reported second quarter revenue of $16.13 billion, up 25% year on year, beating consensus near $14.42 billion. Adjusted earnings were $0.42 a share against $0.21 expected, and non-GAAP gross margin reached 41.8%.
Why did Intel report an $11 billion net loss despite beating estimates?
The net loss of $11 billion was driven by a $12,529 million mark-to-market charge on 159 million escrowed shares held under Intel's CHIPS Act agreement, priced at $20.00 a share and classified as a derivative liability carried at fair value.
How much external revenue did Intel Foundry generate in Q2?
Intel Foundry external revenue was $293 million, up from $174 million the previous quarter, a 68% sequential increase. Intel Foundry named Fortinet as its first publicly named commercial customer on 23 July.
