Source: Motley Fool transcript (published 04/23/2026); call date Thursday, April 23, 2026. Participants: Lip-Bu Tan (CEO), David Zinsner (CFO), John Pitzer (IR).
Lip-Bu Tan, CEO: 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 earnings 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 CPUs where we expect sustained momentum this year and next. Intel 3-based Xeon 6 and Intel 18A-based Core Series 3 products are now in full volume production ramp, and each represents the fastest new product ramp in five years.
Intel is now a very different company than when I first joined over a year ago. Driven by tremendous demand for AI, the semiconductor industry TAM is now approaching $1 trillion. Intel is well positioned with three strategically important assets: our x86 CPU franchise, our advanced packaging technology, and our vast manufacturing network.
For the last few years, the story around high performance computing was almost exclusively about GPUs and other accelerators. In recent months, we have seen clear signs that the CPU is reinserting itself as the indispensable foundation of the AI era. The CPU now serves as the orchestration layer and critical control plane for the entire AI stack. Xeon server demand is seeing strong and sustained momentum. Customers are deploying server CPUs alongside accelerators in a ratio that is moving back towards CPU. We recently announced a partnership with SambaNova Systems on heterogeneous compute architectures. But the backbone of AI computing in production remains a CPU-anchored architecture.
On Intel Foundry: we have made steady progress with Intel 4 and Intel 3, and 18A wafers are now running ahead of internal projections. On Intel 18AP and Intel 14A, we continue to be encouraged by our external engagements. Intel 14A maturity, yield, and performance are outpacing Intel 18A at a similar point in time. We expect earlier design commitments beginning in 2026 and expanding into 2027. We announced our partnership with SpaceX, xAI, and Tesla to support TeraFab. Elon and I share a strong conviction that global semiconductor supply is not keeping pace with the rapid acceleration in demand, and we are exploring unconventional ways to improve manufacturing efficiency.
David Zinsner, CFO: We delivered robust Q1 results reflecting strong demand and better-than-expected available supply. 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.
Non-GAAP gross margin came in at 41%, approximately 650 basis points ahead of guidance, due to higher volume (including previously reserved inventory), mix, and pricing. In addition, better yields on Intel 18A offset some of the higher costs early in a node ramp. We delivered first-quarter non-GAAP EPS of $0.29 versus our guidance of breakeven 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 and adjusted free cash flow of minus $2 billion.
In CCG, revenue was $7.7 billion, down 6% sequentially and better than our expectations. Even with improved factory output, demand outstrips supply against a client TAM that remains resilient. AIPC revenue grew 8% sequentially and now represents greater than 60% of our client CPU mix. Operating profit was $2.5 billion, 33% of revenue, up ~$300 million quarter-over-quarter. CCG launched Core Ultra Series 3 — our strongest product launch in five years.
DCAI revenue was $5.1 billion, an increase of 7% sequentially and 22% year-over-year, well above expectations. We also saw strong ASIC growth with revenue up more than 30% sequentially and nearly doubling year-over-year. Operating profit was $1.5 billion, 31% of revenue, up ~$292 million quarter-over-quarter. Within the quarter, DCAI signed multiple long-term agreements, including Google. In addition, Xeon 6 was selected as the host CPU for NVIDIA's DGX Rubin NVL8 systems. DCAI also established a multiyear collaboration with SambaNova to design a next-generation heterogeneous AI inference architecture.
Intel Foundry delivered revenue of $5.4 billion, up 20% sequentially, on increased EUV wafer mix driven by Intel 3 and significant growth in advanced packaging. External foundry revenue was $174 million in the quarter. Intel Foundry operating loss in Q1 was $2.4 billion, improved $72 million quarter-over-quarter, as better yields across Intel 4, Intel 3, and 18A drove higher gross margins, mostly offset by increased operating expenses from an intentional step-up in Intel 14A investments. Intel Foundry also added to its backlog of advanced packaging services and announced a multiyear expansion of back-end facilities in Malaysia. All Other revenue came in at $628 million, up 9% sequentially due to a strong quarter for Mobileye, with operating profit of $102 million.
On guidance: we are guiding Q2 to a range of $13.8 to $14.8 billion, up 2% to 9% sequentially. 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 are not expected to repeat.
We are prudently planning for PC demand to weaken in the second half and expect the full-year PC unit TAM to be down low double-digit percent. 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. For OpEx in 2026, we had been directionally targeting $16 billion but are likely to be higher due to inflationary pressures and targeted investments. We forecast capital expenditures in 2026 to be flat to last year (versus prior flat-to-down), reflecting increased capacity investments; tool spending will be up ~25% year-over-year.
We recently closed the transaction to repurchase the 49% equity interest in the joint investment in Fab 34 in Ireland — a highly accretive deal. As a result, we now expect noncontrolling interest (NCI) to net to approximately $250 million in each of Q2, Q3, and Q4 this year, and be ~$1.1 billion for 2027 and 2028 on a GAAP basis. Excluding the buyout, we still expect positive adjusted free cash flow for the full year. We funded the purchase with approximately $7.7 billion in cash and $6.5 billion in new debt.
Operator: [Q&A — selected]
Ben Reitzes (Melius): Talk about the Google LTA and how these are structured?
Lip-Bu Tan: Google is one of the multiple long-term contract agreements in Q1 and this is significant — Xeon in production, building a long-term trusted partnership, evidence of strong demand for our CPU and some ASIC business.
David Zinsner: Most of these agreements are structured with volume and pricing, usually between three and five years. It's a win-win — we get good understanding of volumes to build into our supply assumptions, and the customer knows where supply is coming from and what pricing to expect.
Ben Reitzes: Any foundry-customer investment in CapEx, and when will we hear more?
David Zinsner: We are now calling CapEx flat year-over-year (was flat-to-down). Space spend comes down materially; tool spend is actually up ~25%. On external foundry customers, we have been consistent for about a year: customer signals should be more concrete in the back half of this year and into early next year.
Ross Seymore (Deutsche Bank): Competitive position in server CPU — demand or differentiation?
Lip-Bu Tan: The CPU-to-GPU ratio used to be 1-to-8, now 1-to-4, and could move towards parity. On competition, we continue to refine the roadmap — we don't just have the CPU; we have advanced packaging and foundry. We are also quietly building up the GPU with new hires, moving into accelerators (XPU).
Stacy Rasgon (Bernstein): Segment outlook and gross margin — is 18A offsetting server growth?
David Zinsner: In Q2 we'll see more meaningful pricing benefit; data center grows faster, but 18A (Panther Lake) is a headwind — Panther Lake volume is up 6-7x in Q2 vs Q1 and its gross margin is still below corporate average. Back half has materials cost increases (substrates, glass substrates, memory) offsetting improvements. Long term I remain hyper-focused on gross margins.
Tim Arcuri (UBS): Is TeraFab a typical foundry arrangement or process licensing?
Lip-Bu Tan: On 14A, we have the 0.5 PDK available and are aiming for 0.9. TeraFab is a very broad relationship with Elon — exploring innovative ways in process and manufacturing. We have multiple other customers we are engaging.
Vivek Arya (BofA): Server CPU TAM growth and ASP expansion?
David Zinsner: Six months ago we probably thought server units would be down; now up meaningfully. ASPs — we moved pricing to offset cost increases, but unit volume is the biggest driver. Core count is increasing significantly, which gives us a lift.
Vivek Arya: Share vs AMD and ARM?
Lip-Bu Tan: On the roadmap we are putting simultaneous multithreading into Coral Rapids to compete effectively with AMD. On ARM, we have OEM customers working with us and long-term visions; the roadmap from Granite Rapids to Diamond Rapids to Coral Rapids is coming on strong. On the server side, besides x86, we have the SambaNova partnership for dataflow architecture.
C.J. Muse (Cantor Fitzgerald): How will you drive increased output in H2?
David Zinsner: Increasing wafer starts in all three nodes (Intel 10/7, Intel 3, 18A), more meaningfully on EUV nodes; better yields and throughput; and we use outside foundries as needed.
C.J. Muse: Advanced packaging backlog?
David Zinsner: We have been really pleased with traction — demand is in the billions of dollars per year level. Advanced packaging is a differentiated offering and we expect it to be at least at foundry-average gross margins over time.
Suneet Pajjuri (RBC): 18A yields and when does the GM headwind become neutral?
David Zinsner: Lip-Bu's target for end of year is probably going to be hit around the middle of this year. On a combined product-plus-foundry basis, we'll be in a relatively decent place on Panther Lake gross margins by end of year. Foundry-level gross margins need multiple quarters.
Suneet Pajjuri: What's in the ASIC business?
Lip-Bu Tan / David Zinsner: Purpose-built silicon optimized for specific workloads. We have a unique position — CPU/XPU, advanced packaging, advanced processing. It's already at a run rate north of a billion dollars. Over the next five years this will be fast growing.
Josh Buchalter (TD Cowen): How to model CPU demand for agentic workloads — is ARM's $100B reasonable?
David Zinsner: Training solutions run 7-8 GPUs to 1 CPU; inference is probably 3-4 to 1; agentic/multi-agent could flip the other direction. It becomes a significant part of the AI TAM. Beyond data center, client/edge/physical AI could have even more explosive CPU growth.
Aaron Rakers (Wells Fargo): Supply trajectory and server CPU roadmap?
David Zinsner: Supply will go up every quarter going forward. We were at our lowest point of supply in Q1. What we were able to do was go through finished goods inventory and find opportunities to sell product we did not think we would move.
Lip-Bu Tan: 2026 is the year of execution — improving yield, productivity, and cycle time to catch up with demand.
Operator: Thank you, ladies and gentlemen. This does conclude the program. Good day.