Intel Tarnishes Turnaround Story

He points to Intel's 51% target for full-year gross margins. Because Intel left that target unchanged Tuesday, the company has effectively indicated that it will make up for the second-quarter's margin shortfall in the last two quarters of the year.

"They are putting pressure on themselves," says Gorman. "But they're smart enough not to do that unless they thought they could do it," he says, citing the company's improvements in its manufacturing and the improving inventory levels.

The second half of the year is a strong time for PC sales, thanks to the back-to-school and Christmas shopping seasons. And Intel management affirmed Tuesday that the PC market this year appears to be in good shape.

Several financial analysts raised their estimates on similar logic.

Stifel Nicolaus analyst Cody Acree bumped up his estimate for Intel's full-year EPS from $1.07 to $1.13.

"Through the second half, we believe strong unit volumes, likely derived from market share gains, will combine with higher production yields and lean supplies resulting in a more rapid than projected gross margin increase," Acree wrote in a note to investors Wednesday.

"Ultimately we believe this gross margin upside will be the catalyst for further material share appreciation," wrote Acree. Stifel Nicolaus makes a market in Intel shares and has provided Intel with non-investment-banking services in the last 12 months.

The big wild card, of course, is pricing. And Intel confessed that price erosion was a bit more aggressive than it expected in the second quarter and that the company expects the trend to continue for the rest of the year.

That's a tough environment in which to raise gross margins, and in fact, it accounts for much of Intel's recent drop in profitability.

Intel has adapted impressively to the new forces shaping its market. The question now may be whether investors have accepted the new Intel.