Intel just reported the most important earnings of its decade. And almost nobody had it on their bingo card.

First-quarter revenue: $13.6 billion, up 7% year over year. Adjusted earnings per share: $0.29. Wall Street expected $0.01. That is a 2,800% surprise. Shares surged 20% after hours and climbed as high as 25% on Friday, adding tens of billions to a market cap that has already tripled in the last twelve months.

The engine behind the beat: data center and AI revenue jumped 22% to $5.1 billion. The once-sleepy CPU market has taken off as agentic AI workloads shift compute needs beyond Nvidia's GPUs. Central processing units are becoming essential infrastructure for inference, orchestration, and enterprise AI stacks that cannot run on accelerators alone.

"The CPU is reinserting itself as the indispensable foundation of the AI era," CEO Lip-Bu Tan said on the earnings call. "This is not our wishful thinking. It is what we hear from our customers."

The numbers across the board were striking. Non-GAAP gross margin hit 41%, beating Intel's own guidance by 650 basis points. The company guided Q2 revenue to $13.8 billion to $14.8 billion, well above the $13.07 billion Street estimate. It forecast adjusted Q2 EPS of $0.20 against a $0.09 consensus. Intel Foundry revenue climbed 16% to $5.4 billion.

The Musk Factor

Earlier this month, Intel announced it would join Elon Musk's Terafab chip complex in Austin, Texas. The deal: design, fabricate, and package chips at scale for SpaceX, xAI, and Tesla. On Tesla's Q1 call Wednesday, Musk said Tesla plans to use Intel's forthcoming 14A process node for chips destined for vehicles, robots, and orbital data centers.

On Intel's call, Tan confirmed: "Elon and I share a strong conviction that global semiconductor supply is not keeping pace with the rapid acceleration in demand." He added that they are "looking for unconventional ways to improve manufacturing efficiency." Multiple customers are "actively evaluating" the 14A technology, and development is ahead of where 18A was at the same stage.

CFO David Zinsner told CNBC he is confident advanced packaging will bring in billions per customer, up from his previous estimate of hundreds of millions. Intel's advanced packaging customers now include Amazon, Cisco, SpaceX, and Tesla.

The Turnaround Nobody Believed

Two years ago, Intel was a punchline. Former CEO Pat Gelsinger was pushed out in late 2024 after years of manufacturing delays, blown timelines, and a stock price that cratered while Nvidia consumed the AI market. Intel slashed 15% of its workforce, canceled chip fabs in Germany and Poland, and delayed its Ohio mega-fab until 2030.

Then Lip-Bu Tan took over in early 2025. The Trump administration made the U.S. government Intel's largest shareholder, holding roughly 10% of equity through CHIPS Act conversions. Nvidia and SoftBank invested billions. Intel's 18A process node reached high-volume manufacturing at a new Arizona fab. Google committed to using Intel CPUs for AI workloads in its data centers.

The stock is up 80% in 2026 alone, on top of an 84% gain in 2025. It has more than tripled in twelve months.

The Fine Print

Intel is still losing money on a GAAP basis. Net loss widened to $4.28 billion this quarter, or $0.73 per share, from $887 million a year ago. Restructuring charges from European operations and legacy factory consolidation are the culprit. The company guided for a return to GAAP profitability in Q2, which would be the first time in six quarters.

There are real questions. Intel's 18A foundry still has no major external customer beyond its own products, despite being comparable to TSMC's 2-nanometer node. Yield issues have persisted. Some analysts are waiting for promising yields on the next-generation 14A technology before declaring the manufacturing thesis proven.

"Intel was explicit on the Q4 call that they were living hand-to-mouth on wafers," Benchmark analyst Cody Acree told Sherwood News. "If this kind of upside was possible, then why the ultraconservative guidance?"

What Comes Next

This quarter matters beyond Intel. It is the first hard evidence that the AI hardware market is splitting into tiers. Nvidia owns the training layer. But inference, orchestration, and agentic workloads are creating massive CPU demand that Intel is positioned to capture. Advanced packaging, where Intel is one of only three companies globally offering the most advanced type, has become a new bottleneck in the AI supply chain.

The Terafab partnership with Musk is the wildcard. If Intel delivers 14A chips at scale for Tesla's robots, SpaceX's orbital data centers, and xAI's models, it becomes the manufacturing backbone of the most ambitious AI hardware portfolio on earth. If 14A slips like its predecessors, the whole narrative unravels.

Megacap earnings start next Wednesday. Alphabet, Amazon, Meta, and Microsoft all report. Intel just raised the bar for what a comeback looks like in the AI era.

First reported by CNBC, with additional reporting from Sherwood News and Tech Insider.