Intel's Data Center Business Surges 78 Percent and Nearly Catches Its PC Division, but Softer Fourth-Quarter Guidance Clouds the Beat
Third-quarter revenue rose 21 percent to $16.5 billion on the strongest data center growth in 15 years, while the foundry lost $1.85 billion and the outlook pointed down.
Intel reported third-quarter revenue of $16.5 billion, up 21 percent from $13.7 billion a year earlier, with the Data Center and AI group surging 78 percent to $7.3 billion - nearly as big as the company's PC business, according to the earnings coverage read this cycle. CFO David Zinsner called it Intel's strongest data center growth in 15 years; CEO Lip-Bu Tan said the immediate priority is unlocking more supply to meet extraordinary demand for Xeon processors.
The other divisions told a split story. The Client Computing and Physical AI Group, which covers PC chips, fell 5 percent to $8.1 billion, and Zinsner warned the PC slowdown is expected to continue at least through the first half of next year amid industry-wide substrate and memory shortages. Intel Foundry generated $6.7 billion in revenue, up 58 percent including internal sales, but still posted an operating loss of $1.85 billion - an improvement on the $2.32 billion loss a year earlier. Non-GAAP gross margin rose to 44.1 percent and non-GAAP earnings were $0.52 a share, ahead of estimates.
The fourth-quarter outlook is where the caution sits: Intel guided revenue of $15 billion to $16 billion, below the third quarter and below the roughly $17 billion analysts expected, with non-GAAP gross margin falling to around 38 percent and non-GAAP earnings of about $0.25 a share at the midpoint. Quantli's account reported Zinsner disclosing that an October 14 explosion at Intel's Kiryat Gat fabrication facility in Israel, which killed two workers, could reduce revenue by about $300 million in the fourth quarter and a similar amount in early 2027, and cut fourth-quarter gross margin by roughly 200 basis points.
For Austin's technology audience, the shape of the quarter is the story: the money in chips is moving to the data center at a pace that has nearly erased the PC division's lead inside Intel itself, and the constraint is no longer demand - it is supply, substrates and memory. Intel said it released the 14A 0.9 process design kit in the quarter and announced collaborations with ASML, Lam Research and Applied Materials on new capacity and joint research.
