For a lot of server workloads, there are still advantages to having the most powerful CPUs you can build that are economical/power-efficient/etc. It's telling that ARM hasn't made nearly as big inroads in the server space as in mobile. (x86 compatibility is part of the reason but low-power x86 has a long history of not taking off in the server space as well.)
I agree that Intel's big challenge is ARM--or, more broadly, having broad success in spaces where x86 doesn't stack the deck heavily in Intel's favor. They have a long track record of trying to play the x86 card in mobile (Atom) and consumer electronics (ViiV) and they mostly haven't gone anywhere where traditional desktop operating systems weren't involved.