Intel Q3 Revenue Up 21% to $16.5bn; Q4 Guide $15-16bn

Intel’s revenue rose 21% to $16.5 billion in the third quarter, and its data centre business had its fastest growth in 15 years. But Intel forecast lower sales for the final three months of the year. In its results release on 29 October, Intel guided fourth-quarter revenue to $15.0 billion to $16.0 billion. That includes an expected hit from the shutdown at its Israeli factory. It also filed the release with the SEC as exhibit 99.1 to a Form 8-K.

The quarter ran to 26 September. Non-GAAP earnings per share were $0.52, against $0.23 a year earlier and Intel’s own guidance of $0.38. On a GAAP basis, earnings per share fell to $0.60 from $0.90, and net income fell 18% to $3.3 billion. The comparison is uneven. Intel’s reconciliation table shows that the year-earlier quarter included a $5.45 billion gain from divestitures. Intel sold 51% of Altera in September 2025. This quarter included a $1.0 billion mark-to-market gain on shares held in escrow under its agreement with the US government.

Gross margin rose to 43.0% from 38.2% on a GAAP basis, and to 44.1% from 40.0% on a non-GAAP basis. Operating cash flow was $5.1 billion. Intel also completed a $23 billion public equity offering and said it plans to buy the quantum software company Classiq.

Data centre up, PCs down

Data Center and AI (DCAI) revenue rose 78% to $7.3 billion. Chief executive Lip-Bu Tan said in Intel’s prepared remarks that this was “the strongest revenue growth for the segment in 15 years”. Chief financial officer David Zinsner said demand for DCAI products “continues to meaningfully exceed available supply”.

Intel’s PC chip group, the Client Computing and Physical AI Group (CCPG), went the other way. Its revenue fell 5% from a year earlier to $8.1 billion, and 9% from the second quarter. Zinsner said that was “below our expectations”. Tan blamed “industry-wide impacts from higher memory prices and limited IT budgets”. Intel now expects PC unit sales across the industry to fall about 12% in 2026, and by more than 20% in the second half.

Intel Foundry, which makes chips for Intel and for outside customers, had revenue of $6.7 billion, up 58%. External foundry revenue was $411 million. Intel said the sequential rise was “primarily due to a non-recurring customer program”.

Zinsner said: “We delivered another solid quarter. Revenue, gross margin and earnings per share exceeded guidance, including our strongest data center revenue growth in 15 years.” He added: “Looking ahead, we see the PC slowdown continuing at least through the first half of next year.”

The Fab 28 hit and a weaker fourth quarter

Intel said three problems are limiting its supply. The first is yields and cycle times on its Intel 3 process. The second is “an industry wide shortage of advanced organic substrates” used in its EMIB packaging. The third is the shutdown in Israel. Tan said that “an unfortunate and tragic accident led to a extended shutdown in our Israel factory” and that it would affect fourth-quarter shipments of 10nm server chips. TSN reported on the explosion at Intel’s Kiryat Gat plant in mid-October. Intel’s own Israel page names Kiryat Gat as its manufacturing facility in the country and refers to the Fab 28 manufacturing site there.

Zinsner said the fourth-quarter guidance “includes an impact of roughly $300m to revenue and 200 basis points to gross margin based on our early assessment of the incident at Fab 28”. He said almost all of that relates to 10nm server products. Intel expects DCAI revenue to grow by a mid-teens percentage from the third quarter. It expects CCPG revenue to fall by more than 20%, as PC makers cut the stock they hold.

The fourth-quarter guidance is for a non-GAAP gross margin of 38.0% and non-GAAP earnings per share of $0.25. On a GAAP basis, Intel forecast a gross margin of 37.1% and earnings per share of $0.10. Intel said the margin decline “primarily reflects lower overall revenue against our fixed-cost base”.

Reuters reported that Intel shares “plunged 23% after hours”. It said the revenue forecast was below analysts’ average estimate of $17.07 billion, according to LSEG data.

Why the forecast outweighed the beat

Intel beat its own targets for the eighth quarter running, but the forecast shows the limits of that. The company says demand for its server chips is greater than it can supply. At the same time, the PC market is shrinking, and Intel’s PC chip group is still its largest product segment. Both problems hit the fourth quarter together. The midpoint of the guidance, $15.5 billion, is about $1 billion below the revenue Intel has just reported.

The Fab 28 figure, about $300 million, accounts for only part of that gap. Intel’s segment forecasts point to PCs, with CCPG revenue expected to fall by more than 20% while DCAI grows. High memory prices have lifted profits at memory makers such as Samsung, which said strong server demand pushed prices up. For Intel, those same prices make each PC more expensive. Intel says it does not expect a sustained PC recovery until memory availability and prices return to normal.

Intel is putting its $23 billion of new equity and about $54 billion in cash and short-term investments into more capacity. Gross capital spending is on track for $20 billion this year, and Intel says it will be “up strongly” in 2027. Earlier this month, Tan said capital may be the biggest constraint on AI. Intel now has the money to spend. The test is the first half of 2027. By then, Intel needs to show that new supply is reaching server customers before PC demand recovers. Like Amazon, it is spending heavily on new capacity before the returns arrive.