Intel’s revival begins with a problem most companies want
After years of losses and strategic setbacks, Intel says demand for its processors is now exceeding supply, giving Lip-Bu Tan a chance to rebuild the semiconductor giant.
When Lip-Bu Tan took over as Intel CEO in March 2025, he inherited a company facing one of the deepest crises in its history. Intel had missed the mobile revolution, fallen far behind Nvidia in the AI boom, and struggled to restore investor confidence after former CEO Pat Gelsinger’s ambitious turnaround plan, centered on transforming Intel into a leading contract chip manufacturer, was widely viewed as too expensive and slow to deliver results.
Many questioned whether even an executive with Tan’s industry experience could reverse Intel’s decline.
A year and a quarter later, with the release of Intel’s second-quarter 2026 results, there are signs that Tan has managed to achieve a meaningful turnaround in the company’s trajectory. Intel is not yet out of the woods, and many of its biggest challenges remain unresolved, but the company has regained momentum as revenue growth accelerates and demand for some of its core products strengthens.
While Tan deserves much of the credit, Intel’s recent improvement is also the result of strategic moves that began before his arrival, as well as market conditions that have increasingly aligned with the company’s remaining strengths.
Intel’s revenue in the second quarter rose 25% year over year to $16.1 billion, marking the company’s strongest quarterly growth in 15 years.
On a GAAP basis, Intel reported a net loss of $11 billion, compared with a loss of $2.9 billion a year earlier. However, the result was largely driven by a $12.5 billion accounting loss related to the revaluation of equity investments. Excluding that impact, Intel reported a non-GAAP net profit of $2.2 billion, compared with a loss of $400 million in the second quarter of 2025.
The strongest performance came from Intel’s Data Center and AI division, where revenue jumped 59% to $6.3 billion.
The division remains Intel’s closest competitor to Nvidia’s AI infrastructure business. However, Intel has yet to develop a true rival to Nvidia’s graphics processing units (GPUs), which dominate AI model training and control the majority of the market.
What has changed is the nature of AI demand.
As companies move beyond training large AI models and increasingly deploy AI agents and inference workloads, demand is rising for computing power needed to operate those systems. In many cases, central processing units (CPUs) remain critical for these workloads, an area where Intel’s Xeon data center processors maintain a strong position.
“The second quarter growth was the strongest in history, and Xeon 6 continues to be one of the fastest-growing products in Intel’s history,” Tan told analysts.
The challenge now is supply. Demand for Xeon processors has outpaced Intel’s ability to produce them, partly due to broader industry constraints, including shortages of memory and advanced chip substrates.
“Our top priority is to increase production capacity as quickly as possible,” Tan said.
For Intel, this represents a rare type of problem: demand exceeding supply. The company’s ability to expand manufacturing capacity quickly could determine whether it can capitalize on this opportunity before competitors move into the gap.
Another area showing improvement is Intel’s foundry business, which manufactures chips for external customers. Revenue in the division increased 31% to $5.8 billion.
The foundation for this strategy was laid by Gelsinger, who launched Intel’s effort to compete with Taiwan Semiconductor Manufacturing Co. (TSMC) by turning the company into a major Western alternative for chip manufacturing.
The strategy has faced delays and significant costs, but Tan is now attempting to execute it with a sharper focus on efficiency and profitability.
Tan’s early months at Intel were marked by a political challenge that could have threatened his leadership.
In August 2025, President Donald Trump publicly called for Tan to resign, citing concerns over his previous business ties to China and potential conflicts of interest.
However, after a meeting at the White House, Tan managed to turn the confrontation into an opportunity. Trump later described him as an “amazing success.”
Shortly afterward, Intel announced that the U.S. government would convert a $10.5 billion grant awarded under the CHIPS Act into an equity investment, giving the government a 10% stake in the company.
The move provided Intel with additional financial support while also creating a strategic relationship with the administration. For Tan, it transformed a potential political crisis into a significant advantage.
Despite the recent progress, Intel still faces major questions.
The company remains far behind Nvidia in AI accelerators, its foundry ambitions require massive investment, and the semiconductor industry remains fiercely competitive.
Tan is betting that a combination of renewed execution, demand for traditional computing infrastructure, and a more disciplined corporate culture can restore Intel’s position.
