INTC Rides on Strength in Datacenter and AI Group: Is it Sustainable?

Intel Corporation INTC is witnessing growing momentum in the Datacenter and AI Group. Fourth-quarter 2025 revenues were $4.74 billion, up 15% sequentially, backed by solid demand for traditional servers and storage compute led by Xeon 6 processors (code-named Granite Rapids). This was the largest sequential growth in the datacenter business this decade. In the past few quarters, the company witnessed a downtrend in the segment owing to supply chain constraints. However, during the fourth quarter, the company demonstrated a rebound with a modest net sales growth and 26.4% operating margin.

Strong momentum in the server business is a major growth driver. The Granite Rapids delivers high-performance workloads, benefiting from AI-era server refresh cycles. Sapphire Rapids and Emerald Rapids are energy-efficient CPUs that effectively support enterprise AI transitions.

AI clusters require massive interconnect bandwidth. High networking demand in the AI buildouts is driving growth in the custom Application-Specific Integrated Circuit (ASIC) business. The company is gaining solid traction in the hyperscaler business. Its ASIC business grew more than 50% in 2025, and jumped 26% sequentially in the fourth quarter, reaching an annualized revenue run rate greater than $1 billion in the fourth quarter.

Per a report from Grand View Research, the AI infrastructure market was valued at $223.45 billion in 2024 and is expected to witness a compound annual growth rate of 30.4% by 2030. Intel, with its robust portfolio, is expected to gain from this market trend.

How are Competitors Faring?

Intel faces competition from Advanced Micro Devices AMD and Broadcom, Inc. AVGO in this domain.

AMD’s footprint is strong in the data center market thanks to strong adoption of EPYC processors. It is benefiting from strong enterprise adoption, expanded cloud deployments and emerging AI use cases. Based on a strong EPYC and Instinct (AI accelerators) portfolio, AMD expects the Data Center segment revenues to grow more than 60% annually over the next three to five years and scale its AI business to tens of billions in annual revenue in 2027.

In the Custom ASIC space, Broadcom is a major competitor. It is benefiting from strong demand for its networking products and custom AI accelerators (XPUs). For the second quarter of fiscal 2026, Broadcom expects AI revenues to surge 140% year over year to $10.7 billion as XPUs continue to gain traction among its five customers, which include Google, Meta Platforms and Anthropic.

INTC’s Price Performance, Valuation and Estimates

Intel has gained 81.8% over the past year compared with the industry’s growth of 39.1%.

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Going by the price/book ratio, the company's shares currently trade at 1.74, lower than 25.76 of the industry average.

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Earnings estimates for Intel for 2026 and 2027 have declined over the past 60 days.

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Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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