Intel’s AI-Driven Revival: Foundry Progress and Server CPU Demand Signal Turnaround

Financial Rebound and Market Shifts

Intel has reportedly swung back to profitability in the third quarter of fiscal 2025, posting $13.7 billion in revenue—a 3% year-over-year increase—and net income of $4.1 billion. This marks a significant recovery from the previous quarter’s $2.9 billion loss, according to the company’s earnings release. Despite this improvement, sources indicate that Intel’s data center product sales dipped by 1%, while its foundry business revenue declined by 4%.

Financial Rebound and Market Shifts
AI and Foundry Strategy
Server CPU Demand and Inference Focus
Challenges and Strategic Moves

Client computing products led the rebound with $8.5 billion in revenue, a 5% rise, which executives attributed to a stronger-than-anticipated Windows refresh cycle. Analysts suggest that as Microsoft ended support for Windows 10, demand for new hardware capable of running Windows 11 has boosted Intel’s desktop segment.

AI and Foundry Strategy

While Intel’s client business has shown strength, the company acknowledged it has lagged in the AI hardware market, where rivals like Nvidia and AMD dominate with GPUs. Intel’s foundry unit also reportedly trails behind industry leader TSMC in manufacturing capability. However, executives stated that progress is being made on its 18A advanced chipmaking process, which is seen as crucial to closing this gap.

CEO Lip Bu Tan noted that Intel has “made tremendous good progress on 18A” and highlighted the operational readiness of Fab 52 in Arizona, where wafers using the process will be produced. Still, CFO David Zinsner cautioned that capacity for 18A would not see significant near-term increases, with peak supply not expected until the end of the decade. Reports indicate that only Microsoft has so far committed to using the 18A process, though Intel is actively engaging other potential customers.

Server CPU Demand and Inference Focus

Intel’s leadership expressed optimism that the AI infrastructure boom will reinvigorate its server CPU division. According to the earnings call, the expansion of AI data centers is driving demand for server CPUs used in head nodes, inference workloads, orchestration, and storage. Zinsner stated that the total addressable market for server CPUs is expected to grow in 2026, with inference workloads outpacing training requirements over time.

Some data center customers are reportedly inquiring about long-term supply agreements to support AI infrastructure build-out, which—combined with past underinvestment in traditional servers—could help server CPU revenue grow steadily. Additionally, Intel plans to release “successive generations of inference-optimized GPUs” annually, featuring improved memory and bandwidth tailored to enterprise AI applications.

Challenges and Strategic Moves

Despite positive indicators, Intel faces supply and competitive hurdles. The company reportedly cannot produce enough chips using its Intel 7 and Intel 10 processes to satisfy demand and does not plan to invest in expanding this capacity. Zinsner mentioned that Intel is “living off of inventory” in some areas and experiencing shortages in certain chipmaking materials.

To address these issues, Intel is focusing on debt reduction and strengthening its balance sheet, which executives say will provide the financial flexibility needed for future investments. The company is also hiring to bolster its chipmaking operations. Investors responded positively to the quarterly update, with Intel’s stock rising in after-hours trading from around $38 to over $41 per share.

For further details, refer to Intel’s official earnings release.

References

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