Intel surprised investors on Thursday by raising its third-quarter revenue and profit forecasts, citing stronger-than-expected demand for its central processing units (CPUs) in data centers running artificial intelligence workloads. The chipmaker also boosted its capital expenditure plan to $20 billion, signaling a major bet on capacity expansion.
The news comes as Intel, long the dominant player in PC and server chips, works to regain its footing in a market increasingly shaped by AI. While much of the AI chip conversation has centered on Nvidia's graphics processing units (GPUs), Intel's CPUs are finding new life in so-called "agentic AI" systems—software that can autonomously perform tasks—which require a mix of processing power.
What Intel Told Investors
Intel now expects third-quarter revenue in the range of $15.8 billion to $16.8 billion, above the $15.1 billion consensus estimate from LSEG. Adjusted earnings per share are forecast at 38 cents, well ahead of the 27 cents analysts had expected.
The improved outlook follows a second quarter in which revenue rose 25% year over year to $16.13 billion, with adjusted profit of 42 cents a share. The company credited stronger demand for its data-center CPUs as AI workloads spread beyond training into inference and real-time decision-making.
But the surge in demand has created a capacity crunch. Intel's management said the shift happened faster than anticipated, and customers are now signing three- to five-year contracts to secure chip supply. That long-term visibility is what prompted the company to raise its capital expenditure plan to $20 billion, up from previous guidance.
Why This Matters for Investors
For everyday investors, Intel's update is a reminder that the AI boom is not limited to a single chipmaker. While Nvidia has dominated headlines with its GPU sales, Intel's CPUs remain essential for many data center tasks, especially as companies build out infrastructure for AI agents that need to interact with existing software systems.
The raised capex plan is a double-edged sword. On one hand, it shows Intel is investing to capture future growth. On the other, it means higher spending in the near term, which can pressure free cash flow. Investors have seen similar dynamics at other tech giants—Alphabet's AI spending spree burned $5.9 billion in free cash flow earlier this year, though the company also raised its guidance.
Intel's ability to convert those investments into profitable revenue will be key. The company's adjusted profit margin improved in the second quarter, but the full impact of the $20 billion capex plan will take time to show up in earnings.
Broader Market Context
Intel's news comes amid a broader earnings season where companies across sectors are updating forecasts. Harley-Davidson lifted its sales forecast despite a profit drop, while Deckers raised its profit outlook but saw shares fall on steady revenue guidance. The mixed signals highlight how investors are rewarding companies that show both top-line growth and cost discipline.
In the tech sector, the race to build AI infrastructure is driving capital spending to new highs. Intel's $20 billion plan is a significant commitment, but it pales next to the tens of billions being spent by cloud giants like Amazon, Microsoft, and Google. Still, for a company that has struggled with manufacturing delays and market share losses, the raised forecast is a welcome sign of momentum.
What to Watch Next
Investors will be watching Intel's third-quarter earnings report in October for signs that the demand surge is sustainable. Key metrics include data-center revenue growth, gross margin trends, and updates on the company's foundry business, which manufactures chips for other companies.
The multi-year CPU contracts are a positive signal for revenue visibility, but they also lock Intel into pricing and volume commitments that could become less favorable if technology shifts. For now, the market is betting that AI's appetite for processing power will keep Intel's factories busy.
As always, investors should consider their own portfolio diversification and risk tolerance. Intel's turnaround story is still unfolding, and while the raised guidance is encouraging, the company faces stiff competition from AMD and Nvidia, as well as the challenge of executing its $20 billion spending plan without overextending.
