Intel (INTC) stock continued to trend higher and rallied over 28% in pre-market trading on Friday after the chipmaker reported better-than-expected Q1 FY26 results. While the market has long been skeptical of Intel’s turnaround, rising AI demand and a partnership tied to Elon Musk’s “Terafab” are starting to give investors a reason to believe.
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The biggest trigger was a clear beat on both earnings and revenue, along with guidance that came in well ahead of expectations.
Intel reported Q1 earnings of $0.29 per share, far above the $0.01 analysts were expecting. Revenue came in at $13.58 billion, beating estimates by more than $1 billion.
But the real push came from the outlook. Intel expects Q2 revenue between $13.8 billion and $14.8 billion, well above the $13.06 billion consensus. It also guided for EPS of $0.20, more than double the Street’s $0.08 estimate.
At the same time, cost control is starting to show results, with operating expenses down 9%. That signals a more disciplined approach, something investors have been waiting to see.
AI Demand and Foundry Momentum Drive the Rally
The rally is being driven largely by AI, where Intel is starting to regain relevance. Its Data Center and AI segment grew 22% year over year, as demand picked up from companies building AI infrastructure. While Nvidia (NVDA) still leads in training, Intel is gaining traction in inference — where AI models are actually used — creating a more steady demand base.
As AI moves from development to real-world use, this shift toward inference is becoming a key growth driver for Intel.
At the same time, the foundry story is adding to the momentum. Intel’s role in Elon Musk’s “Terafab” project — linked to Tesla (TSLA), SpaceX, and xAI — is being seen as a strong validation of its manufacturing roadmap.
This also supports its broader push to compete with TSMC (TSM), especially as tight industry capacity and demand for advanced packaging solutions like EMIB continue to create new opportunities.
What Investors Will Watch Next
The focus is now shifting to how quickly Intel can scale its progress. First, server CPUs are emerging as a key near-term catalyst. As Intel shifts capacity toward these higher-margin chips, investors will watch for strong demand and whether the company can command better pricing in 2026 and 2027.
Second, its advanced packaging tech like EMIB is in focus. With global AI chip capacity tight, this “back-end” capability could attract more external customers looking for alternatives to TSMC.
Finally, progress on its next-gen nodes, including 18A and 14A, remains critical. Any proof that Intel is hitting its targets could drive the next leg of the rally, while delays would likely pressure the stock again.
Is Intel a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on seven Buys, 23 Holds, and four Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average INTC price target of $56.41 per share implies 15.5% downside risk.
