Intel (INTC.US) Q3 net profit drops 18% year-on-year as PC business remains weak; stock price plunges over 21% after hours

According to Zhitong Finance APP, after the U.S. stock market closed on Thursday, Intel (INTC.US) released its Q3 2026 financial report, with its stock price falling over 21% after hours. Data shows that the company’s revenue for the quarter reached $16.513 billion, up 21% from $13.653 billion in the same period last year; GAAP net profit was $3.32 billion, down 18% from $4.063 billion in the same period last year; diluted earnings per share were $0.60, lower than $0.90 in the same period last year.

After adjustments, Intel's Q3 non-GAAP net profit reached $2.756 billion, an increase of 169% from $1.023 billion in the same period last year; non-GAAP diluted earnings per share were $0.52, up 126% from $0.23 in the same period last year.

In terms of profitability, Intel’s Q3 GAAP gross margin was 43%, higher than last year’s 38.2%, an improvement of 4.8 percentage points; non-GAAP gross margin was 44.1%, up from 40% last year.

Meanwhile, the company’s GAAP operating profit reached $2.522 billion, up about 269% from $683 million in the same period last year; operating margin rose from 5% last year to 15.3%.

Intel CFO David Zinsner stated that revenue, gross margin, and earnings per share for the third quarter all exceeded the company’s prior guidance, and the data center business achieved its strongest revenue growth in 15 years.

Data Center and AI Business Revenue Surges 78%, Server Processor Demand Robust

By segment, the Data Center and Artificial Intelligence (DCAI) business was the main growth driver for Intel in Q3. The financial report shows that DCAI revenue in the third quarter reached $7.318 billion, an increase of 78% from $4.117 billion in the same period last year, marking the strongest growth in 15 years.

Meanwhile, DCAI operating profit reached $3.039 billion, up about 215% from $964 million in the same period last year, demonstrating the significant boost to profitability from increased server processor demand.

Intel CEO Pat Gelsinger stated that despite short-term headwinds in the PC industry, market demand for Intel CPUs remains strong, further strengthening the company’s confidence in long-term growth opportunities.

He noted that Intel’s top priority now is to expand supply capabilities to meet robust market demand for the Xeon series server processors, while continuing to improve the product portfolio and technology roadmap.

In the enterprise computing field, Intel announced a multi-year collaboration with Oracle to expand Intel Xeon processor-based compute capacity within Oracle (ORCL.US) Cloud Infrastructure (OCI). The partnership will cover both current and future Xeon platforms, including the OCI X14 products planned to use the next-generation Diamond Rapids server processor.

Additionally, Intel disclosed technical details of the new generation GPU D series, previously codenamed Crescent Island, mainly geared toward efficient AI inference applications.

PC Business Revenue Declines 5%, Management Expects Weakness to Continue into Next Year

In contrast to the data center business, Intel’s PC-related business continues to face demand pressure. In Q3, Intel's Client Computing and Physical Artificial Intelligence business (CCPG) revenue was $8.097 billion, down 5% from $8.535 billion last year. Operating profit for this segment was $2.285 billion, lower than $2.694 billion in the same period last year, a year-on-year decrease of about 15%.

Intel CFO Zinsner said that the PC market slowdown is expected to continue at least into the first half of 2027. However, the company remains optimistic about growth opportunities from a broader product portfolio and plans to improve product supply capability through disciplined investment in capacity and working capital to support future growth.

On the client product side, Intel announced the launch of the first Googlebook devices equipped with Core Ultra Series 3 processors, with related high-end products to be released by Acer, Asus, and Lenovo.

The company also partnered with AMD to integrate PyTorch optimizations for x86 CPUs into oneDNN, simplifying AI application development and deployment on both Intel and AMD processors.

Foundry Business Revenue Grows 58%, Still Records $1.853 Billion Loss

In the foundry business, Intel’s Foundry segment revenue reached $6.697 billion in Q3, up 58% from $4.235 billion in Q3 last year. However, the segment is still operating at a loss, with an operating loss of $1.853 billion in Q3, a narrowing from $2.321 billion in the same period last year.

It should be noted that revenue disclosed by Intel’s Foundry segment includes inter-group transactions and cannot be directly considered as foundry sales to external clients.

In terms of technical advancements, Intel said it released version 0.9 of the Intel 14A process technology design kit (PDK) in October, further advancing the development of next-generation process technologies.

Moreover, Intel announced a partnership with ASML (ASML.US) to speed up industrialization preparations for High-NA EUV lithography manufacturing technology. The company is also collaborating with Lens Technology, combining Intel’s advanced packaging technology with precision glass processing to promote advanced semiconductor packaging for the AI era.

Operating Profit Up About 269% YoY, Yet Net Profit Declines 18%

It is noteworthy that while Intel’s core operating profitability improved significantly in Q3, GAAP net profit still declined year-on-year. The financial report shows that GAAP operating profit in Q3 grew from $683 million last year to $2.522 billion, an increase of about 269%. However, GAAP net profit attributable to Intel dropped from $4.063 billion to $3.320 billion, an 18% year-on-year decline.

This difference is mainly related to changes in year-on-year non-operational gains.

Intel’s net interest and other income for Q3 was $1.130 billion, significantly below the $3.670 billion in the same period last year. In addition, GAAP results in the same period of 2025 were also affected by gains related to asset spin-offs, which raised the comparative base.

By comparison, after excluding relevant non-operational items and other adjustments, Intel’s non-GAAP net profit in Q3 grew 169% year-on-year, reflecting improved core business profitability.

Operating Cash Flow Reaches $5.1 Billion, Completes $23 Billion Stock Offering

In terms of cash flow, Intel’s operating cash flow in Q3 reached $5.082 billion, up from $2.546 billion in the same period last year, a year-on-year increase of about 100%. Total capital expenditures for the quarter were $4.219 billion, up from $2.956 billion last year.

According to Intel’s adjusted free cash flow standards, adjusted free cash flow for Q3 was $1.639 billion, an increase of about 83% from $896 million the previous year.

On the balance sheet, as of September 26, 2026, Intel held $21.846 billion in cash and cash equivalents, and $32.159 billion in short-term investments, totaling about $54.005 billion.

In addition, Intel announced the completion of a $23 billion public stock offering to support future growth opportunities while maintaining a strong balance sheet and investment-grade credit rating.

Q4 Revenue Expected to Range from $15 Billion to $16 Billion, Margins to Retreat

Looking ahead to Q4 2026, Intel expects revenue between $15 and $16 billion. The company projects a Q4 GAAP gross margin of about 37.1% and a non-GAAP gross margin of about 38.0%, both significantly lower than Q3’s 43.0% and 44.1%.

On profitability, Intel anticipates Q4 GAAP diluted earnings per share of $0.10 and non-GAAP diluted earnings per share of $0.25. Based on the midpoint of revenue guidance, Intel expects Q4 revenue to be about $15.5 billion, lower than Q3’s $16.513 billion.

Intel also expects Q4 GAAP operating expenses of about $4.9 billion and non-GAAP operating expenses of about $4.4 billion.

Pat Gelsinger stated that the company is improving execution efficiency, expanding supply capacity, and continuing to advance process technology. Intel will keep strengthening its product roadmap to capture long-term growth opportunities and create sustainable value for shareholders.