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Intel's Operating Margins Are Improving: Is More Upside Ahead?
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Key Takeaways
Intel's non-GAAP operating margin rose to 12.3% from 5.4% as revenues and profitability improved.
INTC benefited from AI PC demand, Xeon growth, lower operating costs and stronger execution.
Intel Foundry narrowed losses sequentially, but investment in advanced manufacturing weighed on margins.
Intel Corporation (INTC - Free Report) reported non-GAAP operating income of $1.7 billion in the first quarter of 2026, up from $0.7 billion in the year-ago quarter. The non-GAAP operating margin rose to 12.3% from 5.4% a year ago. Such a sharp improvement in profitability is driven by multiple factors.
The company reported strong revenue growth during the first quarter. Client Computing Group (“CCG”) revenues increased to $7.73 billion from $7.63 billion, driven by strong demand for client CPUs and growing adoption of AI PCs. Datacenter and AI Group (“DCAI”) revenues improved to $5.05 billion from $4.13 billion, driven by strong demand for Xeon server CPUs for AI workloads, higher ASIC sales and new long-term customer deals with leading firms like Google. Operating margin in DCAI substantially increased to 30.5% from 13.9% a year ago, while CCG’s operating margin increased to 32.6% from 30.9%.
Intel's margin expansion also benefited from disciplined cost management. Non-GAAP research and development costs and marketing, general and administrative expenses declined 9% year over year to $3.9 billion. Lower operating expenses, combined with stronger revenue growth, supported a strong improvement in profitability.
Operational execution played a crucial role in margin expansion. Disciplined execution, improving factory output and expanding available supply allowed Intel to match rising customer demand despite supply constraints.
Although Intel Foundry's operating loss narrowed sequentially, the segment remained a drag on the company's overall profitability. Higher investments in Intel 14A and the ramp-up of advanced manufacturing technologies continued to pressure the segment's margins despite improving manufacturing yield and execution.
How Are Competitors Faring?
Intel faces competition from Advanced Micro Devices (AMD - Free Report) and Broadcom, Inc. (AVGO - Free Report) in the semiconductor space. AMD's non-GAAP operating income climbed to $2.54 billion, up 43% year over year, as AMD’s top-line growth translated into operating leverage. Data Center operating income increased to $1.60 billion (up 71.6% year over year), translating to a 27.7% operating margin compared with 25.4%. A richer mix of high-margin Data Center products, particularly EPYC server CPUs and Instinct AI GPUs, is driving AMD’s margin.
Broadcom’s operating margin rose 52.4% year over year to a record $14.9 billion, reflecting strong operating leverage as non-GAAP operating margin expanded 200 bps year over year to 67.3%. Disciplined cost management combined with strong revenue growth is driving Broadcom’s operating margin. Revenues are propelled by strong demand for networking products and custom AI accelerators.
INTC’s Price Performance, Valuation & Estimates
Shares of Intel have skyrocketed 372.5% over the past year compared with the industry’s growth of 32.5%.
Image Source: Zacks Investment Research
Going by the price/book ratio, the company's shares currently trade at 4.53 book value, lower than 25.74 of the industry average.
Image Source: Zacks Investment Research
Earnings estimates for INTC for 2026 and 2027 have increased over the past 60 days.
View the Zacks #1 Rank List
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Intel's Operating Margins Are Improving: Is More Upside Ahead?
Key Takeaways
Intel Corporation (INTC - Free Report) reported non-GAAP operating income of $1.7 billion in the first quarter of 2026, up from $0.7 billion in the year-ago quarter. The non-GAAP operating margin rose to 12.3% from 5.4% a year ago. Such a sharp improvement in profitability is driven by multiple factors.
The company reported strong revenue growth during the first quarter. Client Computing Group (“CCG”) revenues increased to $7.73 billion from $7.63 billion, driven by strong demand for client CPUs and growing adoption of AI PCs. Datacenter and AI Group (“DCAI”) revenues improved to $5.05 billion from $4.13 billion, driven by strong demand for Xeon server CPUs for AI workloads, higher ASIC sales and new long-term customer deals with leading firms like Google. Operating margin in DCAI substantially increased to 30.5% from 13.9% a year ago, while CCG’s operating margin increased to 32.6% from 30.9%.
Intel's margin expansion also benefited from disciplined cost management. Non-GAAP research and development costs and marketing, general and administrative expenses declined 9% year over year to $3.9 billion. Lower operating expenses, combined with stronger revenue growth, supported a strong improvement in profitability.
Operational execution played a crucial role in margin expansion. Disciplined execution, improving factory output and expanding available supply allowed Intel to match rising customer demand despite supply constraints.
Although Intel Foundry's operating loss narrowed sequentially, the segment remained a drag on the company's overall profitability. Higher investments in Intel 14A and the ramp-up of advanced manufacturing technologies continued to pressure the segment's margins despite improving manufacturing yield and execution.
How Are Competitors Faring?
Intel faces competition from Advanced Micro Devices (AMD - Free Report) and Broadcom, Inc. (AVGO - Free Report) in the semiconductor space. AMD's non-GAAP operating income climbed to $2.54 billion, up 43% year over year, as AMD’s top-line growth translated into operating leverage. Data Center operating income increased to $1.60 billion (up 71.6% year over year), translating to a 27.7% operating margin compared with 25.4%. A richer mix of high-margin Data Center products, particularly EPYC server CPUs and Instinct AI GPUs, is driving AMD’s margin.
Broadcom’s operating margin rose 52.4% year over year to a record $14.9 billion, reflecting strong operating leverage as non-GAAP operating margin expanded 200 bps year over year to 67.3%. Disciplined cost management combined with strong revenue growth is driving Broadcom’s operating margin. Revenues are propelled by strong demand for networking products and custom AI accelerators.
INTC’s Price Performance, Valuation & Estimates
Shares of Intel have skyrocketed 372.5% over the past year compared with the industry’s growth of 32.5%.
Image Source: Zacks Investment Research
Going by the price/book ratio, the company's shares currently trade at 4.53 book value, lower than 25.74 of the industry average.
Image Source: Zacks Investment Research
Earnings estimates for INTC for 2026 and 2027 have increased over the past 60 days.
Image Source: Zacks Investment Research
Intel stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.