TLDR
- Intel’s Q3 revenue hit $13.7 billion, up 3% year-over-year, with adjusted EPS of $0.23 crushing analyst expectations of $0.01
- Balance sheet strengthened with cash rising to $30.9 billion from $22.1 billion, while debt dropped $3.4 billion to $46.6 billion
- PC market recovery underway with TAM expected to reach 290 million units in 2025, up from 245 million in 2024
- Data center segment operating margin jumped to 23.4% from 9.2% year-over-year despite flat revenue
- Supply constraints on older Intel 10 and Intel 7 processes limiting growth, but Intel 18A process set to power next three product generations
Intel Corporation (NASDAQ: INTC) Stock: Chipmaker Crushes Earnings as PC Market Rebounds and Balance Sheet Strengthens
Intel delivered a better-than-expected third quarter, with revenue of $13.7 billion marking a 3% increase from the prior year. The figure came in $560 million above analyst estimates.
Adjusted earnings per share reached $0.23. Analysts had projected just $0.01 per share. This represented a sharp turnaround from the $0.46 loss posted in the same quarter last year.
The company noted that transactions with the U.S. government during Q3 are complicated. These dealings could lead to revised results later. Intel has engaged with the SEC to validate its accounting treatment, but the government shutdown has paused this process.
Intel’s balance sheet showed real improvement during the quarter. Cash and short-term investments climbed to $30.9 billion from $22.1 billion at the end of 2024. Total debt fell by $3.4 billion to $46.6 billion.
The stronger financial position came from multiple sources. The U.S. government converted CHIPS Act grants into an equity investment. Softbank and Nvidia also made investments in the company. Intel secured another $3.3 billion through the sale of a majority stake in Altera.
CFO David Zinsner said shoring up the balance sheet was a top priority for 2025. The improved position gives Intel more flexibility to continue foundry investments.
PC Business Shows Life
The client computing group generated $8.5 billion in revenue during Q3. That’s a 5% increase from the prior year. Intel pointed to the Windows 11 refresh as a key driver, with Microsoft ending support for Windows 10.
The company expects the total addressable market to approach 290 million units this year. Gartner reported 245 million units for 2024. This would mark the strongest growth since the pandemic boom in 2021.
Newer products like Lunar Lake and Arrow Lake contributed to the stronger performance. An improving demand environment helped Intel’s largest business segment despite mixed competitiveness in its PC portfolio.
The data center and AI segment brought in $4.1 billion during Q3. Revenue dipped 1% year-over-year. However, profitability told a different story.
Segment operating margin reached 23.4% in the quarter. That compared to just 9.2% in the prior-year period. The margin improvement exceeded results from the past year by a wide gap.
CEO Lip-Bu Tan said the latest Granite Rapids chips are seeing strong demand. Intel believes demand for its data center CPUs will rise as companies address underinvestment in traditional infrastructure. Growing need for AI inference workloads should also expand the addressable market.
Manufacturing Process and Supply Issues
The Intel 18A manufacturing process will support at least three generations of PC and server products. Panther Lake laptop CPUs will ship before year-end using this process. Nova Lake for desktops and the Clearwater Rapids and Diamond Rapids server CPUs will follow.
Current yields on Intel 18A remain a concern. Zinsner said yields are adequate for supply but not high enough to drive appropriate margins. The process uses a new transistor design and backside power delivery, both industry firsts that add complexity.
Supply constraints on older Intel 10 and Intel 7 processes limited the company’s ability to meet demand in Q3. This affected both data center and client products.
Intel will prioritize data center production in Q4. The company plans to focus on high-margin server CPUs at the expense of entry-level PC chips. The client computing segment will see a modest sales decline, while the data center segment should post strong sequential growth.
Baird raised its price target on Intel to $40 from $20 while maintaining a Neutral rating. The firm cited promising early performance on Intel’s 14A process technology. Baird called 14A the largest potential breakthrough for Intel in 2026.
Intel’s stock currently trades at $38.28, down more than 40% from its multiyear high.
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