Key insights
- Intel reported strong Q3 results, beating its own guidance on revenue, gross margin, and EPS. However, the stock fell significantly due to weak Q4 guidance, with a projected 6-point drop in gross margin and a halving of EPS. The company cited industry-wide substrate and memory shortages as a contributing factor. Additionally, a recent equity offering increased share count, impacting future EPS potential.
Intel reported Q3 after the close on 10/29. On its own guide, it was a clean beat: revenue $16.5bn (guide $15.8–16.8bn), non-GAAP gross margin 44.1% (guide 42%), non-GAAP EPS $0.52 (guide $0.38). Data center revenue grew 78%. The stock went from a $92.07 close to about $70.19 overnight.
The reason is the Q4 guidance table. Quarter over quarter, from Q3 actual to Q4 guide:
- Revenue: $16.5bn to $15.0–16.0bn (midpoint about 6% lower)
- Non-GAAP gross margin: 44.1% to 38.0%
- Non-GAAP EPS: $0.52 to $0.25
- GAAP EPS: $0.60 to $0.10
Where the split shows up in the segment table:
- Data Center and AI: $7.3bn, up 78% year over year and up from $6.3bn in Q2.
- Client Computing (PCs), still the bigger unit: $8.1bn, down 5% year over year and down from $8.9bn in Q2. In Q2 it was growing 13%. The CFO says the PC slowdown continues "at least through the first half of next year."
The release doesn't explain the 6-point margin drop. The one new hint is in the risk factors, which now mention "current industry-wide substrate and memory shortages." The 10-Q isn't out yet, so that's the first thing I'd look for when it is.
Other things in the 8-K the headline doesn't cover:
- Share count. Intel completed a $23bn public equity offering. Shares outstanding went from 4,994m at the end of 2025 to 5,310m. Weighted basic shares in Q3 were up 16% from a year ago. Non-GAAP EPS still more than doubled, so profit outgrew dilution this quarter. At $0.25 guided for Q4, it won't.
- GAAP profit. GAAP net income ($3.3bn) was higher than non-GAAP ($2.8bn) because of a $1.0bn non-cash gain on "Escrowed Shares." Over nine months the same item is a $12.6bn loss, which is why Intel shows a nine-month net loss of $11.6bn.
- Cash. Cash and short-term investments rose to $54.0bn from $37.4bn, mostly from the offering plus $13bn of new term debt ($9bn repaid). Over nine months Intel also paid out $14.4bn in "partner distributions" to its co-investment partners, against $5.0bn of contributions. The release doesn't say what that was for.
- Capex. Gross capex was $4.2bn in Q3 vs $3.0bn a year ago; adjusted free cash flow was $1.6bn.
How I'd frame it: the quarter was genuinely good, and the data center number is the best in years. But Q4 guidance says PC weakness and lower margins outweigh it next quarter, and there are 16% more shares to spread earnings over. The question is whether 38% gross margin is a one-quarter cost spike or the new level while PCs are soft.
For holders: what would you need to see in the 10-Q or in Q4 to stay in? I'm watching gross margin against 38%, and whether DCAI keeps growing quarter over quarter while client falls.