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Intel Q4 guidance, not the quarter it just reported, is what moved the stock. The chipmaker’s third-quarter results were strong: revenue of $16.5 billion, up 21% from $13.7 billion a year earlier. But the outlook for the next three months points to lower revenue and a much thinner margin, and a market note from Saxo Markets put the after-hours drop at about 23%.
What Intel reported for the third quarter
For the quarter ended Sept. 26, Intel reported diluted earnings of $0.60 a share on a GAAP basis and $0.52 on a non-GAAP basis. A year earlier those figures were $0.90 and $0.23. Gross margin was 43.0% GAAP and 44.1% non-GAAP. Net income attributable to Intel was $3.3 billion GAAP and $2.8 billion non-GAAP.
Capital spending was $4.2 billion in gross additions to property, plant and equipment, and operating cash flow was $5.1 billion. Intel ended the quarter with $21.8 billion in cash and cash equivalents plus $32.2 billion in short-term investments.
Where the growth came from
The gains were uneven. The Data Center and AI group posted $7.3 billion in revenue, up 78%. Intel Foundry brought in $6.7 billion, up 58%. The Client Computing and Physical AI group, the PC chip business formerly called CCG, fell 5% to $8.1 billion, and the “All Other” segment dropped 30% to $0.7 billion.
Put simply, one segment is now carrying the company. Data center revenue is within about $0.8 billion of the PC business. Intel’s earnings preview had flagged data center growth and margins as the two things to watch.
What the Intel Q4 guidance says
For the fourth quarter, Intel guided to revenue of $15.0 billion to $16.0 billion. At the midpoint, $15.5 billion, that is about 6% below the third quarter’s $16.5 billion. Non-GAAP earnings are guided to $0.25 a share, roughly half of Q3’s $0.52, and GAAP earnings to $0.10.
The margin line is the sharper signal. Intel guided to a non-GAAP gross margin of 38.0% and a GAAP margin of 37.1%, based on the midpoint of the revenue range. Against 44.1% non-GAAP in Q3, that is a drop of about 6.1 percentage points in one quarter. The release excerpt does not say what drives the lower margin, so the cause is something to listen for on the company’s call.
The share price reaction varied by report. Saxo’s note cited a fall of about 23% after hours; a separate StockStory summary carried by FinancialContent put it near 18%. After-hours moves can change by the open.
Editor’s take
Watch gross margin, not revenue. Revenue guidance of $15.0 billion to $16.0 billion is a modest step down; a margin falling from 44.1% to 38.0% in a single quarter is the part that changes what each sales dollar is worth to shareholders. If the data center business keeps growing at this pace while the mix of what Intel sells shifts, the open question is whether the lower margin is temporary or the new shape of the business. The Q4 report will be the first real answer.
Intel’s results arrived the same day Amazon reported, and the two together rattled technology shares on Friday morning, according to Saxo.
