Intel delivered two very different stories in a single earnings report on Thursday. The chipmaker's third-quarter revenue rose 21 percent from a year earlier to 16.5 billion dollars, powered by the strongest growth in its data center business in 15 years, yet it forecast fourth-quarter revenue of just 15 billion to 16 billion dollars — below Wall Street expectations — as a deepening personal computer slump and tight supply weigh on the business it still depends on most.
The engine of the quarter was Data Center and AI, where revenue jumped 78 percent to 7.3 billion dollars and operating income reached about 3 billion dollars. Demand for the company's Xeon server processors has climbed sharply as cloud providers and enterprises build out AI infrastructure, where general-purpose CPUs still run much of the orchestration, data movement and inference work around accelerators. Chief financial officer David Zinsner told analysts the segment is on track to finish 2026 nearly 10 billion dollars above the expectations the company carried into the year — a measure of how quickly server CPU demand has outrun Intel's own plans.
"Our immediate priority is to unlock additional supply to meet extraordinary demand for our Xeon family," chief executive Lip-Bu Tan said. "We are moving with urgency and focus to capitalize on these opportunities to deliver sustainable growth and long-term shareholder value." Management said results could have been stronger still without raw material shortages and a disruption at the company's Fab 28 plant in Kiryat Gat, Israel, and the company is investing to expand capacity.
The rest of the income statement was a study in contrasts. Client Computing and Physical AI, the group that sells PC processors, saw revenue fall 5 percent to 8.1 billion dollars, and Intel expects the PC slowdown to continue at least through the first half of 2027, with the market contracting further next year as a severe shortage of memory chips pushes up laptop and desktop prices. Intel Foundry revenue rose 58 percent to 6.7 billion dollars, though the unit still posted an operating loss of about 1.85 billion dollars. Overall, Intel earned 0.60 dollars a share on a GAAP basis and 0.52 dollars adjusted, up from 0.23 dollars a year earlier, with adjusted gross margin improving to 44.1 percent and operating cash flow of 5.1 billion dollars.
For the fourth quarter, Intel guided to adjusted earnings of 0.25 dollars a share and an adjusted gross margin of 38 percent, both well below the third quarter's levels and below analyst forecasts. Investors focused on that guidance rather than the beat: Intel shares fell sharply in after-hours trading, and Asian semiconductor stocks slid on Friday as the outlook, arriving alongside Amazon's enormous AI capital spending plans, deepened questions about how the industry finances the current buildout.
For enterprise IT buyers, the practical takeaway is a split market. Server CPUs are suddenly a constrained, strategic purchase again, with Intel racing to add Xeon supply and a multiyear Oracle collaboration set to expand Xeon-based capacity on Oracle Cloud Infrastructure, including future systems built on its next-generation Diamond Rapids processor. PCs, meanwhile, face rising component prices and shrinking demand. Intel's turnaround no longer hinges on whether data center demand exists — this quarter settled that — but on whether it can manufacture enough of what customers want while its legacy PC business contracts.