Intel's semiconductor manufacturing division has recently announced a significant partnership, securing Fortinet as its inaugural publicly acknowledged external client since the leadership transition to CEO Lip-Bu Tan in March 2025. This collaboration, which entails Intel's production of Fortinet's advanced SP6 security chip using the Intel 4 process, has been met with considerable enthusiasm from investors. The announcement led to an impressive surge of over 8% in Intel's stock value, reflecting a growing confidence in the company's strategic direction ahead of its second-quarter earnings release.
For a considerable period, Intel's foundry initiative, despite numerous announcements, had been in search of definitive, named external clients. The partnership with Fortinet represents a crucial validation of Intel's manufacturing capabilities and its strategy to broaden its customer base beyond its internal product lines. This public commitment from a reputable cybersecurity entity like Fortinet lends significant credibility to Intel's foundry services and could potentially pave the way for future partnerships. The demand within the cybersecurity sector for specialized chips has been on an upward trend for several years, making this collaboration particularly timely.
However, it is important to note the specifics of this agreement. The SP6 chip will leverage Intel's 'Intel 4' fabrication process, which, while a solid and established technology, is not Intel's most cutting-edge offering. Introduced in 2023 for components such as the compute tile in Intel's Core Ultra PC processors, the Intel 4 process represents a foundational step rather than the forefront of semiconductor innovation. While securing a named client for Intel 4 is undoubtedly a positive development, it does not yet signal a major breakthrough for Intel in mass-producing the industry's most advanced chips, a long-term goal that is central to the company's turnaround efforts.
From a financial perspective, the immediate impact of this deal on Intel's overall revenue stream is likely to be modest. In the first quarter, Intel Foundry's revenue stood at $5.4 billion, a 16% increase year-over-year. However, the vast majority of this revenue was derived from manufacturing Intel's own products. External foundry revenue, specifically from external clients, amounted to a mere $174 million during the same period, representing a small fraction of the company's total revenue of $13.6 billion. This highlights the nascent stage of Intel's external foundry business and underscores the significant growth potential it holds.
The company's internal chip demand is showing positive momentum, particularly within its data center and artificial intelligence (AI) segments, which saw a 22% year-over-year revenue increase in the first quarter, outpacing the company's overall growth rate of 7%. Intel's CEO emphasized the growing need for their CPUs, wafers, and advanced packaging solutions as AI capabilities move closer to end-users. Despite these promising trends, Intel reported a net loss of $3.7 billion in the first quarter, although a substantial portion of this was attributed to restructuring and impairment charges. On an adjusted, non-GAAP basis, the company reported a net profit of $1.5 billion.
As Intel approaches its second-quarter earnings report on Thursday, July 23rd, investors will be keenly observing several key metrics. The trajectory of external foundry revenue will be a crucial indicator of the success of Intel's manufacturing strategy. Additionally, the magnitude of the reported net loss and any indications of securing a significant leading-edge customer will be closely scrutinized. The company's stock has experienced a remarkable rally, climbing over 300% in the past year, leading to a forward earnings multiple approaching 90. This valuation suggests a strong market expectation for a successful turnaround, leaving little margin for error. The Fortinet announcement, while a positive signal of progress, did not quantify its financial contribution. Given its current valuation, Intel needs to demonstrate both tangible progress in its foundry business and a clear path to profitability to justify investor confidence.