Intel CEO Lip-Bu Tan says the chipmaker can meet only about half of what its customers are ordering, as AI inference workloads push demand past what its factories can produce. The shortfall is showing up in accelerating revenue growth and a margin recovery, but at more than 50 times next year's expected earnings, the stock already prices in much of that improvement.
Intel CEO Lip-Bu Tan said this week at Splunk's .conf26 conference in Denver that Intel is meeting only about 50% of what its customers are asking for. CEOs have called him directly for more chips, he said, and he has had to apologize because Intel's capacity can't keep up.
Tan attributed the shortfall to surging demand for central processing units that run AI inference — the work AI models and agents do after they're trained — rather than only the graphics chips that dominate AI headlines.
Revenue growth keeps accelerating
Intel's revenue growth climbed from 3% in the third quarter of 2025 to 7% in the first quarter of 2026, then to 25% in the second quarter, when revenue reached $16.1 billion. Its data center and AI segment grew 59% in the second quarter to $6.3 billion, after growing 22% in the first quarter, while the client computing and physical AI segment grew 13%.
Management's guidance points to more of the same. Intel forecast third-quarter revenue between $15.8 billion and $16.8 billion, implying growth of about 19% at the midpoint — guidance issued in July, before Tan described demand the company can't fully meet.
Margins recover as factories run fuller
Intel's non-GAAP gross margin sat at 29.7% a year ago, then climbed to 41% in the first quarter of 2026 and 41.8% in the second, with management expecting 42% in the third quarter. Intel posted adjusted earnings per share of $0.42 in the second quarter, against an adjusted loss a year earlier.
According to CFO Dave Zinsner: "we are meaningfully increasing our investments in equipment, clean room space, and substrates" alongside the second-quarter results. New capacity is on the way, too: Intel's 18A process, which powers its new Panther Lake laptop chips, is already in high-volume production, and Tan said its successor, 14A, begins production in the first quarter of 2027.
A good problem, but not a cheap stock
Shares trade around $109, up about 6% this week and more than triple their price of a year ago. But new processes ramp over quarters, so the supply gap Tan described could persist well into 2027, and customers who can't get chips now may not wait for 14A.
Motley Fool analyst Daniel Sparks argues that isn't a reason to buy: at more than 50 times next year's expected earnings, the stock already assumes years of strong execution, even as Intel's own guidance implies growth cooling to about 19% this quarter from 25% last quarter. A good problem, he writes, isn't the same as a cheap stock.
Source: Motley Fool
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