Intel (NASDAQ:INTC) shares jumped about 19% in after-hours trading Thursday after the company delivered a stronger-than-expected quarterly report, topping earnings and revenue forecasts while issuing an upbeat outlook for the current quarter. The results were driven by robust demand across its data center and AI-related businesses, with management pointing to an acceleration in workloads tied to AI.
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Looking at the numbers, Intel reported Q1 non-GAAP EPS of $0.29, crushing Street expectations of just $0.01 and marking a $0.28 beat. Revenue came in at $13.58 billion, up 6.9% year over year and about $1.15 billion above consensus estimates of $12.43 billion. Guidance was also encouraging, with the company forecasting second-quarter revenue in the range of $13.8 billion to $14.8 billion, ahead of expectations of $13.06 billion. Intel also expects non-GAAP EPS of $0.20, well above the consensus estimate of $0.08.
These are indeed good times for Intel investors – not a statement you would have heard made a little while ago. From a company grappling with execution issues, manufacturing delays, and intensifying competition, Intel’s turnaround efforts have been increasingly well-received by the market.
The shift is being supported by a steady stream of positive developments, including the repurchase of an equity stake in its Ireland fabrication facility, reinforcing its commitment to in-house manufacturing, and its participation as a foundry partner in Elon Musk’s Terafab project, a move that underscores growing confidence in its process technology. Add to that improving demand trends, stronger positioning in AI infrastructure, and a more consistent execution track record, and the overall picture for Intel is clearly moving in a much more constructive direction.
However, according to HSBC analyst Frank Lee, one big catalyst has still not been accounted for in that surge: “We continue to believe the server CPU business is the key near-term catalyst to drive earnings upside and is still not priced in.”
Starting this quarter (2Q26), Lee thinks Intel’s server CPU business has “game-changing” potential. With overall foundry capacity tight, the company is shifting internal capacity, particularly on Intel 3 and 7 nodes, away from client chips and toward server CPUs. Lee thinks this repositioning could support around 20% year-over-year growth in server CPU shipments in 2026. Given the combination of strong demand and limited supply, Intel is also likely to command a “hefty pricing premium,” with Lee believing ASPs (average selling prices) could rise by roughly 20% year over year. Supply constraints are expected to persist into 2027, sustaining another ~20% y/y increase in shipments alongside an additional ~10% uplift in ASPs.
Additionally, while the foundry outlook is improving, the analyst thinks Intel’s back-end manufacturing could “act as a gateway” for external customers looking to utilize its front-end services. The growing need for advanced packaging in AI accelerators, including GPUs and ASICs, combined with tight capacity for chip-on-wafer-on-substrate (CoWoS) technology largely supplied by TSMC, could push some customers toward Intel’s EMIB solution, which offers a more cost-efficient alternative.
“Though we see limited upside in 2026, 2027 could be a pivotal year for the turnaround of this business too,” Lee opined.
All of this leads Lee to see an “attractive risk-reward” setup – strong enough to prompt a meaningful shift in his outlook. Le is upgrading Intel shares to Buy from Hold (i.e., Neutral) and lifting his price target from $50 to a Street-high $95, pointing to a ~42% upside from Thursday’s closing price. (To watch Lee’s track record, click here)
The broader Street, however, is taking a more balanced stance. Intel currently carries a consensus Hold rating, based on 7 Buy, 23 Hold, and 4 Sell recommendations, while the average 12-month price target sits at $56.41, implying about 15.5% downside from current levels (not including the post-earnings jump). (See Intel stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.