The Data Center and AI (DCAI) increased its earnings to to $5.1 billion, up 22% year-over-year and up $400 million quarter-over-quarter. Perhaps more importantly, the business unit's operating margin increased to 30.5%, and it generated $1.5 billion in operating profit (up from $0.6 billion a year before).
This growth reflects a meaningful shift in demand: hyperscalers are deploying more CPUs alongside accelerators as AI workloads move from training toward inference and agentic workloads. Intel claims this marks a structural change in the AI stack as CPUs reclaim their role in the data center and are set to increase attach rates per GPU, which remain primary compute engines. In addition, Intel cited yield and productivity improvements at its Intel 3-capable facilities that produce Xeon 6 processors as major factors for increased margins and profitability of DCAI.
Intel's 'All Other' segment — which includes Mobileye and IMS mask writing services — remains small after deconsolidation of Altera in Q3 2025. During the quarter, its revenue totaled $628 million, down 33% year-over-year (largely due to the deconsolidation of Altera), but at the same time, the segment generated $102 million in operating income, which is good news as it lost $8 million in the previous quarter.
Intel CEO recognizes its 18A node for external customers as 18A-P gets 'inbound interest'
‘CPUs are cool again,' Intel and AMD reporting spikes in CPU demand due to agentic AI
Intel's roadmaps examined — 14A, Nova Lake, Diamond Rapids & AI accelerator push
Intel's Foundry division produces the company's most profitable products for client and data center applications and also absorbs all the losses of the company. The division generated $5.4 billion in revenue last quarter (up from $4.7 billion in Q1 2025), but posted an operating loss of roughly $2.4 billion (up from $2.3 billion in Q1 2025), which means an operating margin near -45%.
The current result reflects higher output (which drives revenue) as well as the early 18A ramp (which generates higher losses). Essentially, Intel Foundry absorbs the full cost of ramping 18A, including low yields, high depreciation, as well as heavy R&D spending on future nodes like 14A. While Intel highlighted improving yields across all of its latest nodes (7/4/3) and growing advanced packaging backlog, external foundry revenue remains minimal, and meaningful customer-driven volume is unlikely before late 2026 or 2027 with 18A or even later with 14A. One thing to keep in mind here is that EUV-based Intel 3/4/18A nodes still represent a minor share (over 10%, probably less than 20%) in Intel's total product mix, which leaves a lot of space for growth.
Intel's messaging during the conference call with investors and analysts emphasized Foundry's progress: better yields, improving factory output, and increasing customer engagement, including partnerships with companies like Google and participation in large-scale initiatives such as TeraFab. While these are important signals, they do not yet translate into financial success for the foundry business.
Intel expects its second quarter of 2026 to show modest sequential growth and projects revenue to be from $13.8 billion to $14.8 billion and non-GAAP gross margin of 39%.
The company's management expects demand for data center CPUs to remain strong, as well as demand for client processors to remain robust, as many PC makers have accumulated enough DRAM and 3D NAND for their systems. However, Intel warns that demand may outstrip supply and also says that in the second half of the year, memory and SSD supplys will be depleted, forcing PC makers to obtain their memory at spot prices, passing increased costs to consumers, which will hit PC sales. In addition, as Intel will increase output of its Core Ultra 3-series Panther Lake processors by six or seven times in Q2, its margins will take a hit.
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Anton Shilov is a contributing writer at Tom\u2019s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends. ","collapsible":{"enabled":true,"maxHeight":250,"readMoreText":"Read more","readLessText":"Read less"}}), "https://slice.vanilla.futurecdn.net/13-4-22/js/authorBio.js"); } else { console.error('%c FTE ','background: #9306F9; color: #ffffff','no lazy slice hydration function available'); } Anton Shilov Social Links Navigation Contributing Writer Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.
Gururu "But Intel is still bleeding money." You're so beautiful but you will never find love. Reply
JRStern >on a non-GAAP basis Famous last words. Reply
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