Data Center and AINarrow moat

Intel (INTC) — moat facet

Intel's server business went from a 6% margin to 40% in three years on a shortage, while AMD took nearly half of server revenue.

Data Center and AI is Intel's server business, and it has changed more in the last year than any other line. It sold $16,919 million in 2025 and earned $3,422 million1. In the second quarter of 2026 it sold $6,262 million, up 59%, and earned $2,474 million2, 40 percent of revenue3.

Data Center and AI operating margin (%)5.9%20238.8%202420.2%202539.5%Q2 2026Intel Form 10-K FY2025; Q2 2026 results release; calculated
A margin that multiplied in a shortage.

What is inside is server processors, AI accelerators, network interface cards, infrastructure processing units and custom chips4. Most of the revenue is Xeon processors; the older generations, made on Intel 7, represented a majority of product sales in 20255. Custom chips are the fastest-growing part, nearly tripling year over year in the second quarter of 20266.

The history is a long fall and a sharp recovery. On the older definitions the data center group sold $26,103 million in 20207. On the current basis, including network products added in 2025, the segment sold $15,980 million in 2023, $16,125 million in 2024 and $16,919 million in 20258, with operating income of $945 million, $1,414 million and $3,422 million9. Margins were about 5.9%, 8.8% and 20.2%10.

How it is paid is by the processor, and the price has moved dramatically. Server average selling prices rose 11% in 2024 while volume fell 8%, fell 4% in 2025 while volume rose 9%11, and rose 48% in the second quarter of 2026 with volume up 9%12. The last jump is a shortage: demand for general-purpose processors alongside AI systems exceeded supply13.

Competition is heavy. Mercury Research estimated AMD at 34.5% of server units in the second quarter of 202614 and 46.2% of server processor revenue in the first15. The hyperscalers design their own chips, and Nvidia's GPU systems have experienced the highest demand16. Intel's 10-K says it has been unsuccessful to date in becoming a meaningful participant in the AI accelerator market17; it took $922 million of Gaudi inventory charges in 202418.

The outlook is a strong 2026 and an open question after. Intel supplies the host processor for Nvidia's DGX Rubin NVL819, is expanding Xeon capacity on Intel 3 with a €5 billion investment20, and works with Google on custom chips21.

This is the line where Intel's recovery is most visible and least secure. The verdict turns on the segment margin after the shortage: holding above 25% would say Intel has a lasting place in the AI data center, and a return toward 10% would say 2026 was a pricing spike.

Moat trajectory: Widening

Revenue +59% and margin 40% in Q2 2026.

The number that tests this moat
Moat Explorer calc
Data Center and AI operating margin, full year
20.2% (2025); about 5.9% in 2023

The server franchise's earning power; a full-year margin above 25% after the shortage would mean the recovery lasts.

How it's calculated: Data Center and AI operating income divided by segment revenue, from Intel's FY2025 10-K.
Source: Moat Explorer calculation from Intel filings ↗
References
  1. ReportedIt sold $16,919 million in 2025 and earned $3,422 million.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 1 business: products, process technology, competition, manufacturing and customers. — FY2025 · publ. 23 January 2026 · source ↗
  2. ReportedIn the second quarter of 2026 it sold $6,262 million, up 59%, and earned $2,474 million, 40 percent of revenue.
    Intel second-quarter 2026 results release, Form 8-K exhibit 99.1. — Q2 2026 · publ. 23 July 2026 · source ↗
  3. ReportedIn the second quarter of 2026 it sold $6,262 million, up 59%, and earned $2,474 million, 40 percent of revenue.
    Intel Q2 2026 earnings call prepared remarks (CEO and CFO). — Q2 2026 · publ. 23 July 2026 · source ↗
  4. ReportedWhat is inside is server processors, AI accelerators, network interface cards, infrastructure processing units and custom chips.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 7 MD&A and Note 3: segment revenue, operating income and drivers. — FY2025 · publ. 23 January 2026 · source ↗
  5. ReportedMost of the revenue is Xeon processors; the older generations, made on Intel 7, represented a majority of product sales in 2025.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 1 business: products, process technology, competition, manufacturing and customers. — FY2025 · publ. 23 January 2026 · source ↗
  6. ReportedCustom chips are the fastest-growing part, nearly tripling year over year in the second quarter of 2026.
    Intel Q2 2026 earnings call prepared remarks (CEO and CFO). — Q2 2026 · publ. 23 July 2026 · source ↗
  7. ReportedOn the older definitions the data center group sold $26,103 million in 2020.
    Intel Form 10-K for fiscal 2021 - segment results for 2019-2021 on the old structure. — FY2021 · publ. January 2022 · source ↗
  8. ReportedOn the current basis, including network products added in 2025, the segment sold $15,980 million in 2023, $16,125 million in 2024 and $16,919 million in 2025, with operating income of $945 million, $1,414 million and $3,422 million.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 7 MD&A and Note 3: segment revenue, operating income and drivers. — FY2025 · publ. 23 January 2026 · source ↗
  9. ReportedOn the current basis, including network products added in 2025, the segment sold $15,980 million in 2023, $16,125 million in 2024 and $16,919 million in 2025, with operating income of $945 million, $1,414 million and $3,422 million.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 7 MD&A and Note 3: segment revenue, operating income and drivers. — FY2025 · publ. 23 January 2026 · source ↗
  10. Moat Explorer calcMargins were about 5.9%, 8.8% and 20.2%.
    Moat Explorer calculation from Intel's reported figures ($ millions unless stated). Segment margins 2025: Client Computing 9,317 / 32,228 = 28.9% (2024: 11,594 / 33,346 = 34.8%; Q2 2026: 2,343 / 8,877 = 26.4%); Data Center and AI 945 / 15,980 = 5.9% (2023), 1,414 / 16,125 = 8.8% (2024), 3,422 / 16,919 = 20.2% (2025), 2,474 / 6,262 = 39.5% (Q2 2026); Intel Products 12,739 / 49,147 = 25.9%. Revenue shares 2025: client 32,228 / 52,853 = 61.0%; data center 16,919 / 52,853 = 32.0%; together 49,147 / 52,853 = 93.0%. Client growth Q2 2026: 8,877 / 7,871 - 1 = 12.8%. Foundry: internal revenue 17,826 - 307 = 17,519, 17,519 / 17,826 = 98.3%; external share 307 / 17,826 = 1.7%; operating losses 7,083 + 13,291 + 10,318 = 30,692. Intel share of x86 server revenue Q1 2026: 100 - 46.2 = 53.8%. Revenue 2025 against 2021: 52,853 / 79,024 - 1 = -33.1%. Headcount 82.3 / 124.8 - 1 = -34%. Government stake 433.3M x $127.39 = about 55.2 bn; purchase funds 5.7 + 3.2 = 8.9 bn. Warrants 241M x (127.39 - 20.00) = about 25.9 bn. Nvidia stake 215M x 127.39 = about 27.4 bn; 215 / 4,994 = 4.3%. Backers 11.0 + 8.9 + 5.0 + 2.0 = 26.9 bn. Apollo 14.2 - 11.0 = 3.2 bn. Mobileye 100% - 23% = 77%. Net debt end-2025: (2,499 + 44,086) - (14,265 + 23,151) = 46,585 - 37,416 = 9,169; 27 June 2026: (1,988 + 48,549) - (12,874 + 16,853) = 50,537 - 29,727 = 20,810. Shares: diluted 4,530 / 4,090 - 1 = 10.8% (2021-2025); outstanding June 2026 5,043 against 4,090 diluted in 2021 = 23% more. China share of revenue 12,694 / 52,853 = 24.0% (2025); 15,532 / 53,101 = 29.2% (2024); China 12,694 / 22,961 - 1 = -44.7% (2021-2025). Gross margin 43,815 / 79,024 = 55.4% (2021); 21,711 / 54,228 = 40.0% (2023). R&D 16,546 - 13,774 = 2,772; R&D share of revenue 13,774 / 52,853 = 26.1% (2025), 16,546 / 53,101 = 31.2% (2024). Operating cash flow to gross capital spending 9,697 / 17,672 = 0.55. All Other external revenue: 54,228 - 32,305 - 15,980 - 547 = 5,396 (2023); 53,101 - 33,346 - 16,125 - 159 = 3,471 (2024); 52,853 - 32,228 - 16,919 - 307 = 3,399 (2025). Trailing EPS to June 2026: -0.06 - (-0.19 - 0.67) + (-0.73 - 2.16) = -2.09. Market value 669.37 / 86.48 = 7.7 times end-2024; share price 127.39 / 29.23 = 4.4 times the 52-week low - other arithmetic. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Intel's Forms 10-K, 10-Q, results releases, prepared remarks and market data; operands shown in the source line.
  11. ReportedServer average selling prices rose 11% in 2024 while volume fell 8%, fell 4% in 2025 while volume rose 9%, and rose 48% in the second quarter of 2026 with volume up 9%.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 7 MD&A and Note 3: segment revenue, operating income and drivers. — FY2025 · publ. 23 January 2026 · source ↗
  12. ReportedServer average selling prices rose 11% in 2024 while volume fell 8%, fell 4% in 2025 while volume rose 9%, and rose 48% in the second quarter of 2026 with volume up 9%.
    Intel Form 10-Q for the quarter ended 27 June 2026 - segments, the Ireland SCIP repurchase, escrowed shares, Intel 14A, customer deposits and debt. — Q2 2026 · publ. 24 July 2026 · source ↗
  13. ReportedThe last jump is a shortage: demand for general-purpose processors alongside AI systems exceeded supply.
    Intel Form 10-Q for the quarter ended 27 June 2026 - segments, the Ireland SCIP repurchase, escrowed shares, Intel 14A, customer deposits and debt. — Q2 2026 · publ. 24 July 2026 · source ↗
  14. Third-party estimateMercury Research estimated AMD at 34.5% of server units in the second quarter of 2026 and 46.2% of server processor revenue in the first.
    HotHardware, Mercury Research Q2 2026: AMD 34.5% of server CPU units, Intel 65.5%. — Q2 2026 · publ. August 2026 · source ↗
  15. Third-party estimateMercury Research estimated AMD at 34.5% of server units in the second quarter of 2026 and 46.2% of server processor revenue in the first.
    Tom's Hardware, Mercury Research Q1 2026: AMD at 46.2% of x86 server CPU revenue and 38.1% of all x86 CPU market value. — Q1 2026 · publ. 14 May 2026 · source ↗
  16. ReportedThe hyperscalers design their own chips, and Nvidia's GPU systems have experienced the highest demand.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - financial statements and notes: results, capital, government and partner transactions, restructuring and tax. — FY2025 · publ. 23 January 2026 · source ↗
  17. ReportedIntel's 10-K says it has been unsuccessful to date in becoming a meaningful participant in the AI accelerator market; it took $922 million of Gaudi inventory charges in 2024.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 1A risk factors and legal proceedings. — FY2025 · publ. 23 January 2026 · source ↗
  18. ReportedIntel's 10-K says it has been unsuccessful to date in becoming a meaningful participant in the AI accelerator market; it took $922 million of Gaudi inventory charges in 2024.
    Intel Form 10-K for fiscal 2025 (year ended 27 December 2025) - Item 1A risk factors and legal proceedings. — FY2025 · publ. 23 January 2026 · source ↗
  19. ReportedIntel supplies the host processor for Nvidia's DGX Rubin NVL8, is expanding Xeon capacity on Intel 3 with a €5 billion investment, and works with Google on custom chips.
    Intel first-quarter 2026 results release, Form 8-K exhibit 99.1. — Q1 2026 · publ. 23 April 2026 · source ↗
  20. ReportedIntel supplies the host processor for Nvidia's DGX Rubin NVL8, is expanding Xeon capacity on Intel 3 with a €5 billion investment, and works with Google on custom chips.
    Intel second-quarter 2026 results release, Form 8-K exhibit 99.1. — Q2 2026 · publ. 23 July 2026 · source ↗
  21. ReportedIntel supplies the host processor for Nvidia's DGX Rubin NVL8, is expanding Xeon capacity on Intel 3 with a €5 billion investment, and works with Google on custom chips.
    Intel first-quarter 2026 results release, Form 8-K exhibit 99.1. — Q1 2026 · publ. 23 April 2026 · source ↗
Sources
Generated September 25, 2026