Intel (INTC) announced strong first quarter earnings results, exceeding analysts' expectations both on the top and bottom lines. However, the company's second quarter outlook disappointed Wall Street, causing a decline in the stock price.

For the upcoming quarter, Intel foresees revenue ranging between $12.5 billion and $13.5 billion, while analysts had anticipated $13.63 billion. Despite this, Intel remains determined to expand its market share in the field of Artificial Intelligence (AI).

To challenge competitors Nvidia (NVDA) and AMD (AMD), Intel is introducing its Gaudi 3 AI accelerator. Additionally, the company is hoping to attract consumer and enterprise customers with its AI PC lineup.

In the first quarter, Intel reported adjusted earnings per share (EPS) of $0.18 on revenue of $12.72 billion. These figures surpassed Wall Street's expectations of an EPS of $0.13 and revenue of $12.71 billion.

Intel's ongoing transformation from a chip designer and manufacturer to a provider of chips for third-party clients has gained momentum. Notably, Microsoft (MSFT) has emerged as one of Intel's first customers, indicating a collaboration in developing custom chips.

This restructuring has resulted in the creation of new divisions within Intel's corporate structure. Revenue is now reported under the Intel Products segment, encompassing the Client Computing Group, Data Center and AI, and Network and Edge divisions. Altera, Mobileye, and Other now fall under the All Other Segment. Additionally, the Intel Foundry business has been established for reporting foundry revenue from Intel and third-party chips.

However, Intel's foundry business incurred a loss of $7 billion in the past year, putting the company in direct competition with TSMC (TSM), the world's largest chip manufacturer. Uncertainty remains about whether the third-party foundry business will become a major revenue source.

Seeking to capitalize on the AI trend, Intel is introducing its Core Ultra processors in the PC market. These chips possess built-in neural processing units (NPUs), allowing AI models to run directly on laptops without reliance on cloud computing. Intel's main competitor, AMD, is also offering its own AI PC chips. In addition, Nvidia claims laptops integrated with its chips can be considered AI PCs. Qualcomm (QCOM) has entered the competition as well, recently unveiling its Snapdragon X Plus chip alongside the previously announced Snapdragon X Elite, to challenge Intel and AMD. Qualcomm aims to outperform certain Intel Core Ultra and AMD chips in terms of performance and battery life, with the new processors set to hit the market later this year.

Despite the mixed outlook for the second quarter, Intel remains committed to expanding its presence in the AI market while facing stiff competition from industry rivals.