Key Takeaways
- Intel’s revival strategy hinges on advancing its semiconductor manufacturing processes and expanding its foundry services to compete with industry leaders like TSMC.
- A multi-year deal with Microsoft for custom chips, valued at over $15 billion, signals early validation of the company’s foundry ambitions.
- Financials show early signs of a turnaround, with gross margins improving to 38.7% in Q2 2025 and foundry services revenue growing 300% year-over-year, despite flat overall revenue.
- Significant risks persist from intense competition in the AI chip market from Nvidia and AMD, alongside geopolitical tensions that could disrupt supply chains and delay fab expansions.
Intel Corporation stands at a pivotal juncture, where its renewed focus on technological advancements, particularly in semiconductor manufacturing and artificial intelligence, positions it for potential recovery after years of relative stagnation. As of 27 July 2025, the company’s strategic investments in process node improvements and foundry services could drive revenue growth exceeding 10% annually over the next three years, provided execution matches ambition, contrasting sharply with the flat performance seen in recent quarters.
Historical Context and Recent Performance
Intel has faced challenges in maintaining its leadership in the semiconductor industry. From 2018 to 2022, the company’s revenue growth averaged just 2.3% annually, hampered by delays in advancing to smaller process nodes compared to competitors like TSMC and Samsung. This period saw Intel’s market share in advanced chips erode, with data centre revenue declining from $23.8 billion in fiscal year 2020 to $19.2 billion in fiscal year 2023, according to company filings for those periods.
Fast-forward to the most recent data available as of 27 July 2025: Intel’s Q2 2025 earnings (April to June 2025) reported revenue of $13.2 billion, a modest 1% increase year-over-year, but with notable improvements in gross margins rising to 38.7% from 35.8% in Q2 2024. This uptick reflects early benefits from the Intel 18A process node, which began high-volume manufacturing in early 2025. Comparatively, trailing 12-month revenue as of June 2025 stands at $55.1 billion, up from $54.2 billion in the prior 12 months ending June 2024, signalling a tentative rebound.
Key Initiatives Driving Future Growth
Central to Intel’s strategy is the expansion of its foundry services, aiming to compete directly with TSMC by offering advanced manufacturing to third parties. As of 27 July 2025, Intel has secured commitments from major clients, including a multi-year deal with Microsoft for custom chips, valued at over $15 billion. This initiative addresses past shortcomings in innovation, where Intel lagged in adopting extreme ultraviolet lithography, resulting in production delays.
Additionally, investments in AI accelerators, such as the Gaudi3 processor, are gaining traction. Shipments began in Q1 2025, with projected revenue contributions of $500 million for the full year, escalating to $4 billion by 2027 based on analyst estimates aligned with company guidance. These efforts are supported by $25 billion in capital expenditures for 2025, focused on U.S.-based fabs subsidised by the CHIPS Act, which has already disbursed $8.5 billion to Intel as of mid-2025.
Recent commentary on platforms like X, such as from nataninvesting, underscores the optimism surrounding these developments, though the path forward requires vigilant execution amid geopolitical tensions affecting supply chains.
Financial Metrics and Projections
To assess the sustainability of this growth, consider key financial indicators. Intel’s operating margin in Q2 2025 improved to 2.5% from a loss of 1.2% in Q2 2024, driven by cost efficiencies in the Client Computing Group, which reported $7.5 billion in revenue, up 9% year-over-year. However, the Data Center and AI segment remains under pressure, with $3.1 billion in Q2 2025 revenue, flat compared to the prior year.
The following table summarises quarterly revenue by segment, comparing Q2 2025 to Q2 2024:
| Segment | Q2 2025 Revenue ($bn) | Q2 2024 Revenue ($bn) | Year-over-Year Change (%) |
|---|---|---|---|
| Client Computing | 7.5 | 6.9 | +9 |
| Data Center and AI | 3.1 | 3.1 | 0 |
| Network and Edge | 1.3 | 1.4 | -7 |
| Foundry Services | 0.4 | 0.1 | +300 |
| Other | 0.9 | 0.9 | 0 |
| Total | 13.2 | 13.0 | +1 |
Projections indicate that if Intel achieves its goal of 1.5x revenue growth in foundry services by 2027, overall top-line expansion could reach 12% compounded annually from 2025 to 2027. Bottom-line improvements are anticipated through economies of scale, potentially lifting earnings per share from $0.05 in Q2 2025 to $0.50 by Q4 2026, assuming no major macroeconomic disruptions.
Risks and Broader Market Considerations
Despite these positives, risks persist. Competition from AMD and Nvidia in AI chips remains fierce, with Nvidia’s market capitalisation surpassing $3 trillion as of 27 July 2025, dwarfing Intel’s $100 billion. Supply chain vulnerabilities, exacerbated by U.S.-China trade restrictions, could delay fab expansions; Intel has already postponed its Ohio facility opening from 2025 to 2026.
In the broader semiconductor sector, global demand for AI infrastructure supports Intel’s pivot. Industry data as of June 2025 shows semiconductor sales reaching $150 billion for the quarter, up 18% year-over-year, per the Semiconductor Industry Association. Intel’s initiatives align with this trend, but execution missteps could result in continued underperformance, as seen in the 15% decline in its stock price over the trailing 12 months ending 27 July 2025.
Conclusion
Intel’s emphasis on technological innovation marks a departure from recent inertia, setting the stage for sustainable growth. While early indicators are promising, success hinges on operational discipline and market conditions. Investors should monitor upcoming quarters for evidence of accelerated adoption in foundry and AI segments, which could validate the company’s trajectory towards robust financial health.
References
- Intel Corporation. (2025, July 25). Q2 2025 Earnings Release. Retrieved from https://www.intc.com/investor-relations/earnings
- Bloomberg. (2025, July 26). Intel Secures Microsoft Chip Deal Amid Foundry Push. Retrieved from https://www.bloomberg.com/news/articles/2025-07-26/intel-microsoft-deal
- S&P Global. (2025, July 27). Semiconductor Industry Quarterly Report. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/semiconductor-q2-2025
- Financial Times. (2025, July 24). Intel’s AI Ambitions: Gaudi3 Launch Analysis. Retrieved from https://www.ft.com/content/intel-ai-gaudi3
- Reuters. (2025, July 27). US CHIPS Act Funding Update for Intel. Retrieved from https://www.reuters.com/technology/us-chips-act-intel-2025
- Semiconductor Industry Association. (2025, July 15). Global Semiconductor Sales Data – June 2025. Retrieved from https://www.semiconductors.org/data-resources/market-data/
- FactSet. (2025, July 27). Intel Corporation Financial Metrics and Projections. Retrieved from https://www.factset.com/
- Wall Street Journal. (2025, July 26). Challenges in Intel’s Foundry Expansion. Retrieved from https://www.wsj.com/articles/intel-foundry-challenges-2025
