Intel has raised its 2026 capital expenditure guidance to over $20 billion and hinted at further increases in 2027. Goldman Sachs believes this signals the company's full-scale bet on expanding advanced manufacturing and packaging capacity, driven by AI server demand and long-term growth in its foundry business, marking the start of a new long-term capital investment cycle. However, Goldman Sachs maintains a neutral rating on Intel, citing that peers such as AMD, NVIDIA, and Broadcom still offer better revenue visibility and risk-reward profiles.
Intel significantly lifted its 2026 capital expenditure guidance from $17 billion to over $20 billion and indicated further substantial increases in 2027. This move, combined with its quarterly results that broadly exceeded expectations, sends a clear signal to the market: the chip giant is betting on a long-term expansion cycle centered around advanced manufacturing processes and packaging capacity.
According to Goldman Sachs research, Intel's second-quarter revenue reached $16.1 billion, far surpassing the bank's estimate of $14.3 billion and the market consensus of $14.4 billion. Non-GAAP earnings per share came in at $0.42, nearly double the market's $0.22 estimate. Meanwhile, the company guided third-quarter revenue to a midpoint of $16.3 billion and gross margin to 42%, both significantly above market expectations.
The jump in capital expenditure is not an isolated decision but is built on multiple foundations: the continuous yield improvement of the 18A process, progress ahead of schedule on the 14A process, and strengthening demand signals from data center customers.
Goldman Sachs analyst James Schneider and his team believe that Intel is benefiting from rising server demand driven by agentic AI, and the long-term potential of its foundry business provides an upside option value for the stock. However, Goldman Sachs maintains a neutral rating on Intel with a target price of $150, arguing that peers like AMD, NVIDIA, and Broadcom still offer superior revenue visibility and risk-reward profiles.
Broad Beat Across All Metrics, Data Center Stands Out
Intel's second-quarter results exceeded market expectations across all business lines, with the Data Center and AI (DCAI) segment being the standout performer.
DCAI revenue reached $6.26 billion, up 24% sequentially and 59% year-over-year, surpassing Goldman Sachs' estimate of $5.68 billion and the market consensus of $5.59 billion. Intel attributed this growth to a strong recovery in general-purpose server demand and incremental demand from agentic AI.
The Client Computing Group (CCG) generated revenue of $8.88 billion, also exceeding Goldman Sachs and market expectations by about 11%. The foundry business, Intel Foundry, posted revenue of $5.77 billion, slightly above estimates. Overall gross margin reached 41.8%, about 254 basis points higher than Goldman Sachs' forecast, while operating margin was 17.2%, nearly 600 basis points above market expectations.
Looking ahead to the third quarter, Intel expects DCAI to achieve even stronger sequential growth as additional capacity comes online. The company is currently facing capacity constraints, and supply-side expansion will directly translate into revenue growth. Based on this, Goldman Sachs raised its earnings per share estimates for 2026 to 2028 by an average of about 49%.
Capital Expenditure Surges, Betting on Advanced Packaging and 14A Process
The upward revision in capital expenditure guidance is the most strategically significant signal from this earnings report. Intel raised its 2026 capital expenditure from $17 billion to over $20 billion and explicitly stated that investments will increase further in 2027 and beyond, to support advanced packaging capacity expansion and preparation for 14A process mass production.
In terms of specific investment directions, Intel plans to increase wafer fab equipment (WFE) spending by about 40% in 2026. This increase reflects the company's earlier advanced investment in building shells and cleanroom space, which is now entering a phase of equipment fill. Intel stated that it will simultaneously expand front-end wafer capacity and advanced packaging capacity to meet strengthening customer demand signals.
Goldman Sachs noted that Intel's recent traction in advanced packaging and its strategic positioning as a "national champion" for U.S. foundry services provide upside option value for the stock. However, the sharp increase in capital expenditure also implies higher near-term free cash flow pressure, with Goldman Sachs estimating Intel's net debt/EBITDA ratio rising from 0.8x to 1.2x in 2026.
Process Technology Progress Provides Confidence
The confidence behind the capital expenditure expansion comes from Intel's tangible progress in process technology. The company stated that yield and production ramp for the 18A process in server and client products continues to progress, and it entered risk production for 18A-P in the second quarter.
For the next-generation 14A process, Intel disclosed that its internal process metrics at the same node stage are ahead of where 18A was at that time. The company plans to release PDK 0.9 in October this year, with risk production expected in the second half of 2027 and mass production in 2028.
Goldman Sachs believes the positive progress on the process roadmap is an important positive factor in this earnings report, helping to boost market confidence in Intel's foundry business's long-term competitiveness. However, analysts also cautioned that a slower-than-expected ramp of advanced process nodes and potential market share loss in server CPUs remain key downside risks for Intel.
Goldman Sachs Maintains Neutral Rating, Balancing Valuation Upside and Competitive Pressure
Despite the broadly better-than-expected results and guidance, Goldman Sachs maintains a neutral rating on Intel with a 12-month target price of $150, based on 30 times a normalized earnings per share estimate of $5. This implies about 42% upside from the current stock price of around $100.
Goldman Sachs analysts see Intel's upside risks primarily from three sources: gaining more customer traction in foundry services, stronger-than-expected improvement in server CPU demand and market share, and a greater-than-expected margin improvement. Downside risks center on a slower-than-expected ramp of advanced process nodes and potential loss of server CPU market share.
Goldman Sachs views Intel's closest peers—AMD, NVIDIA, and Broadcom—as more attractive in terms of revenue visibility and risk-reward profiles, which is the core logic behind maintaining a neutral rating. For investors, Intel's current investment value is more akin to a long-term position with upside option characteristics rather than a source of short-term certainty.
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