Intel Stock Drops Despite Fastest Quarterly Revenue Growth Since 2011

Intel released its financial results after the market closed on Thursday, delivering what The Motley Fool described as the strongest numbers of its ongoing turnaround. Revenue climbed 25% year over year to $16.1 billion, easily outpacing management’s April forecast that had capped expectations at $14.8 billion. According to CNBC, the performance marked the company’s fastest quarterly growth rate for any period since 2011.

Wall Street initially rewarded the report. Shares jumped about 12% in after-hours trading on Thursday following a regular session close at $100.23. By Friday, however, those gains had vanished, and the stock traded below the previous day’s closing price. Analysts noted that the retreat followed an impressive run that had lifted the stock over 170% earlier in 2026, driven in part by the U.S. government taking a 10% stake in the company last year to support domestic chip manufacturing.

Data Center Surge and Broad-Based Segment Growth

The primary engine behind Intel’s acceleration was its data center and artificial intelligence segment. Revenue in that division surged 59% year over year to $6.3 billion, accelerating sharply from the 22% growth recorded in the first quarter as demand for server processors climbed. Chief Executive Officer Lip-Bu Tan pointed directly to this market dynamic in the earnings release.

“AI is driving unprecedented demand for compute, and as we continue to execute, Intel is well-positioned to capture sustainable growth across our CPU franchise, ASICs, advanced packaging and vast wafer foundry network.”

Lip-Bu Tan, CEO of Intel

Growth extended beyond AI infrastructure into traditional units. The client computing and physical AI division, which manufactures PC chips, generated $8.9 billion in revenue—a 13% increase from the prior-year period. Meanwhile, Intel’s foundry segment, which builds chips primarily for the company’s own products while seeking outside clients, grew 31% to $5.8 billion.

Profitability Recovery and the Net Loss Decoding

Profitability metrics registered some of the most striking improvements in the report. Intel’s non-GAAP adjusted gross margin landed at 41.8%, representing an increase of 12.1 percentage points compared to the same period a year earlier. Adjusted operating margins swung positively to 17.2%, recovering from a negative 3.9% in the year-ago quarter.

Adjusted earnings per share reached $0.42, beating analyst consensus estimates of 21 cents and reversing the $0.10 adjusted loss per share from a year prior. In dollar terms, that translated to $2.2 billion in adjusted net income, alongside $7.0 billion in operating cash flow.

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At the same time, the headline financial tables included a reported net loss of $11.0 billion. The Motley Fool reported that the figure stemmed from a $12.5 billion non-cash, mark-to-market charge associated with shares held in escrow under the company’s CHIPS Act agreement with the federal government, representing an accounting adjustment rather than an operational cash cost.

Supply Constraints, Long-Term Contracts, and Foundry Spending

Intel executives indicated that demand continues to outpace production capabilities in specific divisions. Chief Financial Officer Dave Zinsner told analysts on an earnings call that data center customers are demanding more server processors than the company can manufacture.

“Customers continue to signal a strong and sustainable spending environment.”

Dave Zinsner, CFO of Intel

To manage market volatility and secure pricing power, Intel has begun crafting long-term agreements with server CPU customers. According to CNBC, the company has secured 10 such agreements, with some locking in pricing and others focusing purely on chip volume—a strategy mirroring memory market practices designed to protect against potential downturns.

To support manufacturing expansion, Zinsner noted that Intel is meaningfully increasing investments in equipment, clean room space, and substrates, with capital expenditures targeting a meaningful increase next year primarily directed toward factory tooling. While the foundry business added Fortinet earlier in the week as a named customer using older manufacturing tech, investors continue to wait for a major external tenant for Intel’s advanced 14A process node.

Third-Quarter Guidance and Market Valuation Realities

Looking ahead, Intel management issued third-quarter guidance calling for revenue between $15.8 billion and $16.8 billion, with adjusted earnings per share projected at $0.38 and an adjusted gross margin of approximately 42% at the midpoint. Those projections exceeded analyst estimates, which had anticipated $15.1 billion in revenue and 27 cents per share.

Despite the operational momentum, market valuation remains a central debate for investors. With a market capitalization of about $480 billion, shares trade at roughly 60 times annualized adjusted earnings from recent quarters. Analysts observe that this valuation requires the company to sustain rapid growth quarters over an extended horizon, explaining why the stock pulled back despite posting its most robust financial performance in over a decade.