Intel earnings show profit rebound as analysts flag spending worry
Intel posted its fastest revenue growth in 15 years, but analysts say higher capital spending may keep investors cautious.
By Sal Moretti · Money Reporter
3 min read
Intel earnings delivered the chip maker’s fastest revenue growth in 15 years, according to MarketWatch, while analysts zeroed in on a profit rebound that suggests the company is getting more out of its costly manufacturing base.
The upbeat read on the business did not lift the stock in early trading. Intel shares were down about 3% in Friday morning action, according to MarketWatch.
What did Intel earnings show?
Seaport Research analyst Jay Goldberg wrote in a late-Thursday note that profitability was the key detail in the report. He said Intel’s pro-forma gross margin rose above 40% for the first time since the start of 2024.
Goldberg also pointed to a pro-forma operating margin of 17%, which he said was Intel’s best showing since early 2022. In his view, that margin performance showed the power of Intel’s high fixed-cost model when revenue starts to improve.
A fixed-cost model means a company spends heavily before sales arrive, including on manufacturing and design. When demand improves, more of each extra dollar of revenue can flow through to profit because much of the spending base is already in place.
Goldberg wrote that this structure had worked against Intel for years, but said it now shows what the company can do as it comes back from being “near-dead.”
Why analysts say demand is stretching Intel
MarketWatch noted that Intel’s latest results mark a sharp change from two years ago, when the company suspended its dividend and carried out large layoffs as it tried to preserve cash.
Rosenblatt analyst Kevin Cassidy wrote Friday that demand for compute is “pushing Intel’s capacity limits.” He said Intel is shifting capacity from personal-computer central processing units to server central processing units, yet client revenue still rose substantially from the year-earlier quarter.
Bernstein analyst Stacy Rasgon said Intel’s PC business, represented in its client segment, delivered “surprising upside” in the quarter. Sales from Intel’s client computing and physical artificial-intelligence group were $8.9 billion in the second quarter, about $900 million higher than the consensus estimate, according to Rasgon.
That strength matters because the PC market has been a pressure point for chip companies in recent years, while demand tied to computing and artificial intelligence has become a major focus for investors.
Why is Intel stock down after the report?
Rasgon said uncertainty around Intel’s capital-expenditure comments could make investors cautious. Capital expenditures are spending on long-term assets, such as plants and equipment, and they can weigh on cash even when demand is improving.
According to Rasgon, Intel raised its capital-spending outlook for this year to more than $20 billion. MarketWatch reported that the company had previously guided for $18 billion in capital expenditures this year.
Rasgon also noted that Intel expects spending to be “up significantly” in 2027, a comment he said leaves room for interpretation and nervousness. That spending question is now sitting beside the brighter margin story investors saw in the latest Intel earnings report.
This story draws on original reporting from MarketWatch.