Shares of Intel (INTC +2.64%) surged in extended trading Thursday after the semiconductor company reported first-quarter results that were far better than Wall Street expected.
For a company that has spent years trying to regain credibility with investors, this was an important update -- one that is driving home a new bull case for the stock.
What is this bull case? The central processing unit (CPU), a chip type Intel has long dominated, may have a more important role in the artificial intelligence (AI) boom than many investors previously thought.
Image source: Getty Images.
A stronger quarter
Intel's first-quarter revenue rose 7% year over year to $13.6 billion, easily ahead of the midpoint of management's prior guidance for $11.7 billion to $12.7 billion. And the company's non-GAAP (adjusted) earnings per share was $0.29, up from $0.13 in the year-ago quarter.
Additionally, Intel's adjusted gross margin expanded to 41%, up from 39.2% in the first quarter of 2025. And adjusted operating margin increased to 12.3%, up from 5.4%.
But the most important part of the quarter was the strength in Intel's data center and AI business, which includes server processors and related products. Revenue in the segment rose 22% year over year to $5.1 billion, significantly outpacing Intel's overall growth rate.
That marks a meaningful acceleration from the fourth quarter of 2025, when data center and AI revenue rose 9% year over year. This acceleration is a big win for investors, as it shows that the company's most important AI-adjacent business is gaining momentum.
Management's second-quarter outlook also helped. Intel guided for Q2 revenue of $13.8 billion to $14.8 billion, with adjusted earnings per share of $0.20. At the midpoint, the revenue outlook implies about 11% year-over-year growth.
Why the CPU matters again
And perhaps the most important narrative from the update is this: AI infrastructure isn't just about graphics processing units (GPUs), it's about CPUs, too.
GPUs, of course, still matter enormously for training and running large AI models. But as AI workloads move further into inference, agentic AI, physical AI, edge computing, and enterprise deployment, CPUs may play a larger role in coordinating systems, moving data, and handling the control layer around accelerators.
During Intel's first-quarter earnings call, CEO Lip-Bu Tan put it this way: "Customers are deploying server CPUs alongside accelerators in a ratio that is moving back toward CPU."
This means that Intel doesn't need to become a major player in AI accelerators to benefit from AI infrastructure spending. Sure, any momentum it finds in accelerators will help. But as CPUs become increasingly essential as AI systems grow more complex and distributed, even the company's CPU business will benefit.
And first-quarter data suggests this is already happening.
The company said Intel Xeon 6 was selected as the host CPU for Nvidia's DGX Rubin NVL8 systems. Additionally, Intel recently announced a multiyear collaboration with Google involving Xeon processors and custom application-specific integrated circuits (ASICs), chips designed for specific workloads.
"The next wave of AI will bring intelligence closer to the end user, moving from foundational models to inference to agentic," explained Tan during the company's first-quarter earnings release. "This shift is significantly increasing the need for Intel's CPUs and wafer and advanced packaging offerings."
NASDAQ: INTC
Key Data Points
Risks remain
As encouraging as the quarter was, Intel stock is still risky.
The company's foundry business, which manufactures chips, continues to be a major source of losses. Intel foundry revenue rose 16% year over year to $5.4 billion in the first quarter, but the segment still posted an operating loss of $2.4 billion.
With that said, the company reported an adjusted net profit of $1.5 billion, up 156% year over year. So this is a fantastic start to the company's turnaround.
But with a market capitalization of about $335 billion after the stock's more than 20% gain in after-hours trading on Thursday, investors seem to already be pricing in the company's turnaround and the excitement surrounding CPUs.
Overall, Intel's latest report did bolster the bull case. The company's data center and AI business is accelerating, the CPU may have found a more compelling role in the AI boom, and management's second-quarter outlook was stronger than expected.
But the foundry losses, heavy capital needs, and already-surging stock price make the stock risky for anyone considering buying it today. With this said, shareholders should be happy. Intel's recent execution has been phenomenal, and its addressable market seems to be expanding as the CPU finds its place in the AI era.
