Intel reported second-quarter revenue of $16.1 billion on Wednesday, a 25 percent increase from a year earlier and the company's fastest quarterly growth since 2011. Adjusted earnings per share came in at 42 cents, double the Street's estimate of 21 cents. Data Center and AI revenue rose 59 percent to $6.3 billion. The foundry division grew 31 percent to $5.8 billion. Intel 18A output exceeded internal targets by 25 percent. Every operating metric cleared the bar.
The GAAP number was a net loss of $11 billion.
The Ghost
The loss traces to a single non-cash line: a $12.5 billion mark-to-market charge on shares held in escrow by the U.S. Department of Commerce. In August 2025, the Trump administration restructured Intel's CHIPS Act agreement into an equity deal. The government purchased 433.3 million shares of Intel common stock at $20.47 per share, a total investment of $8.9 billion, giving the federal government a 9.9 percent stake in the company. Of those shares, 274.6 million went directly to Commerce when the deal closed. The remaining 158.7 million went into escrow, to be released as funds are disbursed under the Pentagon's Secure Enclave program.
Accounting rules treat the escrowed shares as a derivative liability. Every quarter, Intel must revalue the obligation at its current stock price. The government bought at $20.47. Intel traded above $100 on the day it reported earnings. The shares are worth roughly five times what the government paid. The gap between the purchase price and the current market value is the paper loss. It is not a cash payment. It does not represent a deterioration in Intel's business. It is the accounting cost of a rescue that worked.
The structure is self-amplifying. The better Intel performs, the higher the stock goes. The higher the stock goes, the larger the mark-to-market charge. The larger the charge, the worse the GAAP loss looks. Intel's best quarter in fifteen years produced Intel's worst GAAP result in its history because the government's bet on the company is paying off.
The Turnaround
Underneath the ghost, the operational recovery is real. The Data Center and AI group generated $6.3 billion, its highest quarterly revenue since the segment was formed, driven by server demand from hyperscalers building AI infrastructure. Client computing grew 13 percent to $8.9 billion. CEO Lip-Bu Tan said Intel is the only company that can design and manufacture the full range of computing solutions from general-purpose CPUs to purpose-built ASICs optimized for agentic AI.
The foundry is the riskiest piece. Intel Foundry reported $5.8 billion in revenue but an operating loss of $2.1 billion, an improvement of $348 million from the prior quarter. External foundry revenue was $293 million, up from $174 million, but still less than two percent of total revenue. Fortinet became the first publicly named external customer, manufacturing its next-generation security chip on Intel 4 at Fab 34 in Ireland. An unnamed major cloud provider has committed to 18A production.
Factories running Intel 18A exceeded internal volume targets by 25 percent. Output rose more than 50 percent quarter over quarter. Panther Lake, the first product on 18A, has seen its cost reduced approximately 50 percent year to date. The next node, 14A, is outpacing 18A at the equivalent stage of development, with internal risk production possible in the second half of 2027.
The Invoice
Intel's stock jumped 12 percent to $110 in after-hours trading on Wednesday. By Thursday's close, it had reversed to $92.32, down nearly eight percent. Investors did not sell on the $11 billion GAAP loss. Everyone understood the escrow accounting. They sold on the real number.
Intel raised its 2026 capital expenditure guidance from approximately $18 billion to more than $20 billion. Capital expenditures in 2027 are expected to be significantly above 2026 levels, with the vast majority spent across Intel's U.S. network. The company is locking in tool purchase orders, accelerating clean-room build-outs, and securing substrate and memory supply. The front end of the capex plan, where fabs are more expensive than packaging facilities, accounts for the largest share.
This is the same arithmetic that hit Alphabet the day before. Alphabet reported $44.9 billion in capex in the same quarter it posted record revenue, and the market took seven percent off the stock. Intel's capex goes into building the fabs. Alphabet's capex goes into buying the chips those fabs produce. The same AI dollar travels through both balance sheets, and the market punishes it at every stop.
The escrow charge is an artifact. The capex is not. Intel's foundry loses $2.1 billion per quarter while generating $293 million in external revenue. The government's $8.9 billion stake is worth roughly $45 billion at current prices. The rescue is profitable. The turnaround still has to earn its return. Intel filed one quarter that contained both the proof that the rescue worked and the invoice for what comes next. The ghost everyone can see through is not the cost that matters. The cost that matters is the one they are choosing to pay.