Intel (NASDAQ:INTC) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Intel reported Q1 2026 revenue of $13.6 billion, exceeding expectations with strong demand across all business units.
The company continues to see robust demand for its Xeon server CPUs, with new products in full volume production driving momentum.
Intel’s strategic focus includes expanding its foundry business and partnerships, evidenced by collaborations with SpaceX, XAI, and Tesla.
The company plans to increase its wafer and packaging capacities, with expectations of a strong second half of the year despite some supply constraints.
Management highlighted significant growth in AI-driven businesses, which now account for 60% of revenue, and the strategic importance of its x86 CPU franchise.
Full Transcript
OPERATOR
Thank you for standing by and welcome to the Intel Corporation Earnings First Quarter Earnings 2026 Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you’ll need to press star 11 on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star 11 again. As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Mr. John Pitzer, Corporate Vice President of Investor Relations. Please go ahead, sir. Thank you Jonathan. And good afternoon to everyone joining us today.
John Pitzer (Corporate Vice President of Investor Relations)
By now you should have received a copy of the Q1 earnings release and earnings presentation, both of which are available on our Investor relations website, intc.com for those joining us online today, the earnings presentation is also available in our webcast window. I am joined today by our CEO Lip Bhutan and by our CFO David Zinsner. LipU will open with comments on first quarter results as well as provide an update on the progress we’re making on our strategic priorities. Dave will then discuss our overall financial results including second quarter guidance before we transition to answer your questions. Before we begin, please note that today’s discussion does contain forward looking statements based on the environment as we currently see it and as such are subject to various risks and uncertainties. It also contains references to non GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent annual report on Form 10K and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non GAAP financial measures, including reconciliations where appropriate to our corresponding GAAP financial measures. With that, let me turn things over to Lipu.
Lipu
Thank you John and good afternoon everyone. Q1 results demonstrate continued and steady progress across the business reflecting strong demand for our products and disciplined execution to expand available supply. Revenue, gross margin and earning per share were all above the high end of guidance marking our sixth consecutive quarter of exceeding financial expectations. Even as we improve factory output, demand continues to run ahead of supply for all our businesses, especially for Xeon server CPUss where we expect sustained momentum this year and next. Intel 3 based Xeon 6 and Intel 18A base core Series 3 products are now in full volume production RAM and each represents the fastest new product RAM in five years. We are maximizing and optimizing our factory output to meet customer needs. It is Our top priority, intel is now a very different company than when I first joined over a year ago. We have taken and continue to take deliberate steps to rebuild intel into more competitive and more profitable company. Our cultural transformation is well underway and we are embracing our roots as data driven, paranoid and engineering centric company. We are also listening closely to our customers and putting them at the center of everything we do. Intel processes some of the most vital assets necessary to be successful and to flourish in this era of extraordinary opportunity for the semiconductor industry. With a stronger balance sheet, a new leadership team, a rejuvenated and motivated workforce and a renewed focus on engineering execution, we are turning our attention squarely towards innovation to capture opportunities in the near term and to position the company for robust growth in the long term. Driven by tremendous demand for AI, the semiconductor industry TAM is now approaching $1 trillion. Intel is well positioned to benefit from this demand with three strategically important assets. Our x86 CPUs franchise, our advanced packaging technology and our vast manufacturing network. Artificial intelligence is now moving into the real world towards a more distributed inference and reinforced learning workloads like agentic physical AI and robots and edge AI. This shift is now beginning to show up in in our results as I want to spend some time on this today. For the last few years the story around high performance computing was almost exclusively about GPU and other accelerators. In recent months we have seen clear sign that the CPUs is reinserting itself as the indispensable foundation of the AI era. CPUs now serves as the orchestration layer and critical control plane for the entire AI stack. This is not just our wishful thinking, it is what we hear from our customers and it is evident in the demand profile for our products. Xeon server demand is seeing strong and sustained momentum. Customers are deploying server CPUss along accelerators in the ratio that is moving back towards cpu. The accelerator remains central to frontier AI and we will continue to participate, innovate and partner in that category. Our recent announcement with Sampanova Systems is an example of such partnership on hectogeneous compute architectures. But the backbone of AI computing in production remains a CPUs and anchor architecture. That is good news for the x86 ecosystem, it is great news for intel and it is a structural reason. I’m confident that CPUs franchise will continue to be a meaningful growth engine for the company in the years ahead, not just a quarters ahead. Turning to Intel Foundry the accelerating deployment of AI infrastructures creates a meaningful opportunity for us as we continue to build our external foundry business. I’m pleased with the progress we have made in foundry technology development over the last year, even though I will continue to remind you this will be a long journey for us. We have made steady progress with Intel 4 and Intel 3 and 18A years are now running ahead of the internal projections representing a meaningful infection in our execution and our factory finished good output. We also continue to make steady progress on our advanced packaging technologies, including additional growth in customer backlog in the quarter on Intel 18AP and Intel 14A. We continue to be encouraged by our external engagements. Intel 14Amaturity, yield and performance are outpacing Intel 18A at a similar point in time and we continue to develop PDKs with multiple customers actively evaluating the technology. Their partnership has been critical and their feedback is continuing to help us define the the technology so that we can cater to their needs. We expect to see earlier design commitments emerge beginning in the second half of 2026 and expanding into the first half of 2027. I’m particularly pleased that our progress today has driven us to lend more of our own future product types on Intel 14a as well. a time when advanced wafer capacity is in the short supply, this enables us to have better control over our supply chain. Intel has pioneered nearly every major innovation that has enabled dimensional scaling and high volume manufacturing of silicon transistors over the last six decades. We have always been willing to take measured risks that have eventually passed away for step function improvements in transistor density, cost, power and performance. As we look to continue challenging the status quo. I can think of no better partners than Elon Musk. We recently announced our partnership with SpaceX, XAI and Tesla to support Terrafab. Elon and I share a strong conviction that global semiconductor supply is not keeping pace with a rapid acceleration and in demand. We are excited to explore innovative ways to refactor silicon process technology, looking for unconventional ways to improve manufacturing efficiency that will eventually lead to dynamic improvements in the economics of semiconductor manufacturing. A year ago the conversation about intel was about whether we could survive. Today it’s about how quickly we can add manufacturing capacity and scale our supply to meet enormous demand for our products. This is a fundamentally different company today and we still have a lot of work ahead. I would like to take this opportunity to thank our many customers, partners and our hard working employees across the world for their contributions towards building a new Intel. I remain firmly convinced of and focused on the opportunity ahead for Intel. With that I will pass it to Dave.
Dave
Thank you Lipu. We delivered robust Q1 results, reflecting strong demand and better than expected available supply. We also benefited from improved product mix and pricing actions in part to offset higher costs. First quarter revenue was $13.6 billion, $1.4 billion above the midpoint of our guide. Q1 revenue would have been meaningfully higher, but demand continues to outpace our growing supply. Our collective AI driven businesses now represent 60% of revenue and grew 40% year over year. These results reflect real and deliberate changes we have made to be more responsive and accountable this quarter. Our teams worked directly and diligently with customers to reach mutually beneficial outcomes in weeks, not months. We value the partnership and support shown by our customers, partners and suppliers as we work to navigate this environment together. Non GAAP gross margin came in at 41%, approximately 650 basis points ahead of guidance due to the combination of higher volume which included previously reserved inventory, mix and pricing. In addition, better yields on Intel 18a offset some of the higher costs we we always incur in the early part of ramping a new node. We delivered first quarter non GAAP earnings per share of $0.29 versus our guidance of break-even on higher revenue, stronger gross margins and continued spending discipline. Q1 EPS included a roughly $0.06 one time gain in interest and other Q1 operating cash flow was $1.1 billion with gross CapEx of $5 billion in the quarter and adjusted free cash flow of -2 billion. Moving to segment results, CCG revenue was $7.7 billion, down 6% sequentially and better than our expectations. Even with improved factory output, demand outstripped supply against a client TAM that remains resilient to despite industry wide component shortages and inflationary pressures. Our AI PC revenue grew 8% sequentially and now represents greater than 60% of our client CPU mix. Operating profit for CCG was $2.5 billion, 33% of revenue and up approximately $300 million quarter over quarter on improved mix and product margins, sales of previously reserved inventory better 18A yields and lower operating expenses. Within the quarter, CCG launched Core Ultra Series 3 and expanded our offerings across consumer, commercial and edge. This has proven to be our strongest product launch in five years, delivering better performance per watt, stronger integrated graphics and more capable on device AI features, all while maintaining our broad ecosystem of compatibility with that partners and customers value in Q1. CCG also expanded the reach of our Core family by launching the intel Core Series 3 processor which brings the latest IP, modern features and all day battery life to the mainstream for the first time. We’re enabling a new class of mainstream systems that once again set the standard for everyday computing DCAI revenue was $5.1 billion, an increase of 7% sequentially and 22% year over year, well above expectations and reinforcing the strong year of growth for DCAI. We signaled 90 days ago. Strength continued across all segments and customers as investments in CPUs are accelerating to support the evolution of AI from foundational training to inference and from inference to agentic. We also saw strong ASIC growth with revenue up more than 30% sequentially and nearly doubling year over year. Operating profit for DCAI was $1.5 billion, 31% of revenue and up approximately $292 million quarter over quarter on improved product margins, better cycle times and yields, especially on Intel 3 and lower operating expenses within the quarter. DCAI signed multiple long term agreements including Google supporting our view that the current business momentum is Sustainable. In addition, Xeon 6 was selected as the host CPU for Nvidia’s DGX Rubicon NVL8 systems and Xeon remains the most deployed host CPU due to its industry leading memory security and networking orchestration. Lastly, DCAI also established a multi year collaboration with SAMOVA to design a next generation heterogeneous AI inference architecture combining Sammon Nova’s RDUS and Intel Xeon 6 processors. Intel foundry delivered revenue of $5.4 billion, up 20% sequentially on increased EUV wafer mix driven by Intel 3 and significant growth in 18A external foundry revenue was $174 million in the quarter. Intel foundry operating loss in Q1 was $2.4 billion and improved $72 million quarter over quarter as better yields across Intel 4.3 and 18A drove higher gross margins. This was mostly offset by increased operating expenses associated with an intentional step up in in Intel 14A investments to support both internal and external customer evaluations. As a reminder, Intel Foundry carries the bulk of the costs associated with the early ramp of Intel 18A and we expect Intel Foundry’s operating loss to improve through the year as 18A continues to ramp into volume and yields improve further within the quarter. Intel Foundry delivered output above our expectations, drove steady improvements in yields and met key 14Amilestones. Intel Foundry also added to its backlog of advanced packaging services and announced a multi year expansion of our back end facilities in Malaysia. This expansion will help support the committed demand that will begin to convert to revenue in 2027. Turning to all other revenue came in at $628 million and was up 9% sequentially due to a strong quarter for Mobileye. Collectively, the category delivered an operating profit of $102 million. Now turning to guidance as we look ahead, we remain mindful that the macroeconomic and geopolitical environments are dynamic. Views on global growth policy and trade continue to shape customer behavior and investment decisions. In addition, constraints and rising prices around key components like memory wafers and substrates are driving higher costs that could impact demand for our product at some point in the year. We’re prudently planning for PC demand to weaken in the second half of the year and expect the full year PC unit TAM to be down low double digit percent in line with industry peers and experts. Offsetting this near term customer order patterns remain very robust across all of our businesses. In addition, our confidence in the sustained growth of CPUs driven by the AI infrastructure buildout is growing. Our outlook for server CPU demand has improved over the last 90 days and we expect a strong year of double digit unit growth for the industry and for us with momentum extending into 2027. Combining all of these factors, we’re guiding Q2 revenue to a range of 13.8 to $14.8 billion, up 2 to 9% sequentially as we work hard to support the needs of all of our customers. We expect sequential revenue growth in both CCG and DCAI on improved supply and a full quarter of pricing actions, with DCAI up double digits at the midpoint of $14.3 billion. We forecast a gross margin of 39%, a tax rate of 11% and EPS of $0.20, all on a non GAAP basis. Our Q2 gross margin guide declines modestly from Q1 due to a meaningfully larger contribution from Intel 18A, still early in its ramp, and some inventory benefits in Q1 that aren’t expected to repeat in Q2. Before I close, I’ll share some additional insights on the full year. We expect our factory network to continue increasing available supply in the third and fourth quarters and though at a more measured pace than we anticipated 90 days ago, reflecting the base effect of much stronger than expected first half output. We also expect 2026 revenue on a half on half basis to follow the seasonal trends experienced over the last 10 years with servers above and PCs below. We were very pleased with Q1 gross margins and we will continue to push for gross margin expansion. It’s my top priority. Our foundry …
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