Intel Corp. (INTC  ) delivered its strongest quarter in 15 years on Thursday, but the report also exposed a stark internal imbalance. The Data Center and AI (DCAI) division generated $2.5 billion in operating income, while Intel Foundry posted a $2.1 billion operating loss. Put side by side, the foundry loss equaled 84% of the operating profit generated by Intel's fastest-growing major division.

Chips Business Fires on All Cylinders

DCAI revenue reached $6.3 billion, up 59% year-over-year from $3.9 billion, as hyperscalers and enterprises kept buying server processors for AI workloads. Operating margin expanded from 16.1% a year ago to 39.5%.

CFO Dave Zinsner said the jump reflected higher revenue, improved product margins and lower operating expenses, calling the roughly $1 billion sequential gain in operating profit meaningfully ahead of expectations.

The Client Computing and Physical AI Group added $8.9 billion in revenue, up 13% to 15%, at a 26% operating margin, giving Intel's two product segments a combined $4.8 billion of operating profit.

Foundry Narrows the Gap, But Stays Red

Intel Foundry revenue climbed to $5.8 billion, up 31% year-over-year, driven by stronger fab volumes on the Intel 18A process, which ran roughly 25% above target and more than 50% higher quarter-over-quarter.

The operating loss narrowed to $2.1 billion from $3.2 billion a year earlier, an improvement of $348 million sequentially. Zinsner credited stronger yields, faster cycle times, and increased factory scale across Intel 43 and 18A for the improved wafer costs.

External foundry revenue, the figure investors watch most closely for third-party validation, totaled just $293 million. Tesla Inc. (TSLA  ) recently signed on as a customer for Intel's next-generation 14A process for its Terafab AI chip project, a win executives point to as validation of the foundry strategy.

Tension in Intel's Comeback

Total revenue hit $16.1 billion, up 25% year-over-year, the fastest growth rate since 2011, and non-GAAP earnings per share of 42 cents doubled the 21 cents consensus estimate, per Benzinga Pro. Shares jumped as much as 12% in after-hours trading following the report.

AI-related server demand is reviving Intel's most profitable franchise, but the cost of rebuilding manufacturing competitiveness continues to consume most of that operating contribution.

At the current run rate, Intel Foundry is losing roughly $8 billion annually with no confirmed break-even date, even as management touts narrowing losses and rising external interest as proof the turnaround under CEO Lip-Bu Tan is gaining traction.

INTC Stock Price Activity: Intel stock was up 3.15% at $103.39 during premarket trading Friday, according to Benzinga Pro data.

Over the past month, INTC has declined about 22.3% versus a 0.4% rise in the S&P 500 and is up roughly 174% year-to-date compared to the index's 7.7% gain.