Intel's Q3 2026 Earnings: Data Center and AI Business Revenue Up 78% Year-over-Year

Chip Inside reported on October 30 that Intel today announced its financial results for the third quarter of 2026. The company achieved revenue of $16.51 billion (approximately RMB 110.01 billion) in the third quarter, up 21% year-over-year, exceeding guidance for the eighth consecutive quarter. GAAP net profit was $3.32 billion (approximately RMB 22.12 billion), down 18% year-over-year; non-GAAP net profit was $2.8 billion (approximately RMB 18.66 billion), up 169% year-over-year.

In addition, the company's GAAP operating profit was $2.52 billion (approximately RMB 16.79 billion), with an operating margin of 15.3%; non-GAAP operating profit was $3.2 billion (approximately RMB 21.32 billion), with an operating margin of 19.6%.

Intel CEO Lip-Bu Tan said that in this quarter the company made progress in execution improvement, supply expansion, and process technology; the current top priority is to unlock production capacity to meet demand for Xeon server processors. At present, Intel 18A yield has achieved double-digit improvement, and 18AP is on track to launch at the end of the year.

He also mentioned that strong momentum in the Data Center and AI (DCAI) business drove results to exceed expectations and delivered the segment's strongest revenue growth in 15 years.

Intel's third-quarter GAAP gross margin was 43.0%, up 4.8 percentage points year-over-year; non-GAAP gross margin was 44.1%, up 4.1 percentage points year-over-year. The company's CFO David Zinsner cautioned that fourth-quarter non-GAAP gross margin will fall back to 38.0%, mainly due to the combined impact of the shutdown of the Fab 28 plant in Israel, PC client inventory adjustments, and continued investment in foundry.

David Zinsner said that the third quarter of this year was a relatively weak quarter for the PC industry in recent years, and inventory destocking will continue at least through the first quarter of 2027. Intel expects overall PC shipments to decline by about 12% in 2026 and continue to fall by about 10% in 2027; before memory supply and prices return to normal, the market is unlikely to see a sustained recovery.

Lip-Bu Tan said that 2027 is Intel's "year of investment," capital expenditure will increase significantly, and the company will not achieve positive free cash flow for the full year.

As of 17:31 after-hours Eastern Time on October 29, Intel fell 19.22% to $74.38 per share (approximately RMB 495.6 per share). Calculated at this after-hours price, the after-hours total market capitalization is approximately $393.228 billion (approximately RMB 2.6 trillion); at the close, total market capitalization was $486.692 billion (approximately RMB 3.2 trillion), and after-hours market capitalization evaporated by approximately $93.464 billion (approximately RMB 622.8 billion).

01. Data Center and AI business up 78% year-over-year, PC business dragged down by memory shortage

Intel's core business is divided into two major product groups and one foundry segment: Client Computing and Physical AI (CCPG), covering PC processors (Core and Core Ultra series), edge and AI PC chips; Data Center and AI (DCAI), covering Xeon server CPUs, AI-oriented servers and GPU products; and Intel Foundry, which provides wafer manufacturing and advanced packaging services externally.

By business segment, the company's Client Computing and Physical AI business third-quarter revenue was $8.10 billion (approximately RMB 53.97 billion), down 9% quarter-over-quarter and down 5% year-over-year, with an operating margin of 28.2%.

Data Center and AI business revenue was $7.32 billion (approximately RMB 48.78 billion), up 78% year-over-year, with an operating margin of 41.5%.

David Zinsner explained that strong demand in the Data Center and AI business came from hyperscale cloud providers, enterprises, and emerging cloud providers, with Purpose Built Silicon revenue more than doubling year-over-year. The decline in Client Computing and Physical AI business revenue was mainly because industry-wide memory shortages affected the PC market size; by contrast, AI PC demand grew year-over-year, demand for Wildcat Lake chips based on the 18A process was strong, shipments grew 70% quarter-over-quarter, and they are currently fully sold out.

Intel Foundry segment revenue was $6.70 billion (approximately RMB 44.65 billion), up 58% year-over-year, with an operating loss of $1.85 billion (approximately RMB 12.33 billion), and the loss margin narrowed from -54.8% in the same period last year to -27.7%. The company said improvements in yield and production cycles are lowering wafer costs.

On a GAAP basis, Intel generated $5.1 billion (approximately RMB 33.98 billion) in cash flow from operations in the third quarter, compared with $2.546 billion (approximately RMB 16.97 billion) in the same period last year, up about 100% year-over-year, mainly benefiting from high revenue growth in the Data Center and AI business and improved operating efficiency. After adjustments for items such as partner contributions, the company's free cash flow was $1.6 billion (approximately RMB 10.66 billion), up about 83% year-over-year.

As of the end of the third quarter, Intel's cash and cash equivalents and short-term investments totaled approximately $54 billion (approximately RMB 359.82 billion). At the same time, the company completed a $23 billion (approximately RMB 153.26 billion) public equity offering, bringing in new sovereign funds and long-term growth investors; it also has an additional $15 billion (approximately RMB 99.95 billion) expanded revolving credit facility on its books.

For fourth-quarter guidance, Intel expects revenue of $15 billion to $16 billion (approximately RMB 99.95 billion to 106.61 billion), a non-GAAP gross margin of 38.0%, and earnings per share of $0.25 (approximately RMB 1.7).

For the full year, the company is maintaining 2026 capital expenditure at $20 billion (approximately RMB 133.27 billion).

Over the long term, the server CPU market is expected to expand from $40 billion to more than $200 billion (approximately RMB 266.54 billion to 1,332.68 billion) within five years.

02. Israel fab shutdown to hit Q4 results; server CPU shipment growth to exceed 30% for two consecutive years

Regarding fourth-quarter guidance and 2027 planning, with Q4 gross margin falling back to 38% and negative free cash flow in 2027, Intel cited the following factors: the shutdown of the Fab 28 plant in Israel, tight supply of EMIB advanced organic substrates, and PC client inventory adjustments. The company expects to offset these through capacity reallocation, ramping new products, and releasing new capacity in the second half of the year, while also focusing capital expenditure on advanced-process equipment and expanding external foundry customers.

David Zinsner disclosed on the earnings call that the prolonged shutdown of the Fab 28 plant in Israel will bring about $300 million (approximately RMB 2.00 billion) in revenue loss in the fourth quarter, and the revenue impact in the first quarter of 2027 is expected to be similar in scale.

On capacity reallocation, Chen Liwu responded that Intel will reallocate some wafer capacity for client products to server chip production lines to ease data center supply constraints; capacity for the Intel 3 process at the company's Oregon plant in the United States will come online in the second half of 2027.

On the server business, the market is broadly focused on Intel's share trajectory next year under supply constraints. Chen Liwu said next year's share performance will be mainly determined by capacity supply, and Intel's product roadmap is competitive versus rivals.

He mentioned that demand for AI server CPUs is currently strong, with industry server CPU shipment growth exceeding 30% in both 2026 and 2027, and supply tightness will persist through 2027-2028; Chen Liwu revealed that many customers are interested in signing long-term agreements (LTAs) to lock in capacity, but the company currently cannot fully meet current demand. Intel's supply will remain tight in the first half of 2027 and ease somewhat in the second half as new capacity comes online, with growth momentum in the data center and AI business continuing throughout the year.

On Intel's product side, Nova Lake will fill the gap in the high-end desktop product line. The PC market currently shows divergence: demand for the high-end AI PC Panther Lake remains resilient amid the broader market downturn, while Wildcat Lake, focused on value for money, has achieved significant growth; Intel hopes to rely on Nova Lake to optimize its product mix and drive a share increase in the PC business.

On the foundry business, Chen Liwu said several external customers are evaluating the Intel 18AP and 14A processes, and multiple collaboration announcements are expected in the next two quarters; Intel 14A released version 0.9 of its PDK to core customers in October, with version 1.0 to be released in the first quarter of 2027.

In advanced packaging, Intel's EMIB and EMIB-T technologies for internal products have already won favor with a large number of external customers. At the same time, Intel has reached a collaboration with Lens Technology in the TGV glass through-hole advanced packaging field, partnered with ASML to accelerate High-NA EUV mass-production readiness, and partnered with Lam Research and Applied Materials on capacity expansion and joint R&D.

Regarding the 2027 capital expenditure structure, David Zinsner responded that equipment spending has already risen significantly this quarter and will grow even more noticeably next quarter; most of the additional capital expenditure will go toward equipment procurement, with only the Ohio plant in the United States still in a large-scale construction phase. He also reiterated that 2027 is a heavy-investment year and the company will not achieve positive free cash flow for the full year, which is also the core reason for the August equity financing; over the long term, these advanced-process nodes are expected to achieve a minimum return on investment of 20%.

03. Conclusion: Servers replace PCs as the new growth engine

AI workloads are currently migrating from training to inference and Agentic AI, cloud providers' capital expenditure continues to expand, and data centers' demand for CPU scheduling, memory, and network coordination is rising in tandem, making server CPUs another essential component of AI infrastructure besides GPUs.

The core of Intel's current growth round is x86 server CPUs, with the surge in AI inference and Agentic AI workloads directly translating into x86 server CPU orders. The company's current leading position is maintained through capacity and product cadence; combined with custom chip orders going from zero to one, the server business has taken over from the PC business as the growth engine.

This article is from the WeChat public account "Chip East West," author: Cui Yuanwei, editor: Chen Junda, published by 36Kr with authorization.