Intel Corporation (NASDAQ: INTC) posted a Q3 that split the difference. Revenue of $16.5 billion rose 21% year over year, missing consensus by roughly $24 million. Non-GAAP EPS of $0.52 beat estimates by 26% and more than doubled from $0.23 a year earlier.
The numbers hide a deeper divide. Data Center and AI (DCAI) revenue jumped 78% to $7.3 billion, its fastest growth in 15 years. Operating income nearly tripled to $3.0 billion from $964 million, driven by pricing power in AI-optimized Xeon processors. Meanwhile, Client Computing and Physical AI Group (CCPG) revenue slipped 5% to $8.1 billion on PC market softness that management expects to linger through at least the first half of 2026.
The beat came from DCAI alone. Intel Foundry revenue grew 58% to $6.7 billion, yet the segment posted a $1.85 billion operating loss, barely improved from $2.32 billion a year ago. Gross margin gained 4.8 percentage points to 43.0% on a GAAP basis. Still, the cash burn makes the $23 billion equity offering completed during the quarter look less like growth capital and more like a balance sheet necessity.
GAAP net income fell 18% to $3.3 billion, or $0.60 per diluted share, down from $0.90 a year earlier. The drop traces almost entirely to a $5.5 billion divestiture gain in the prior-year quarter that did not repeat. Underlying earnings tell a different story. Non-GAAP net income rose 169% to $2.8 billion.
Q4 guidance landed soft. Revenue of $15.0 billion to $16.0 billion implies a $15.5 billion midpoint, below the $16.5 billion just reported and roughly flat with the $15.3 billion consensus. GAAP EPS of $0.10 and non-GAAP EPS of $0.25 trail the $0.52 print, reflecting the PC slowdown and higher costs. GAAP gross margin guidance of 37.1% marks a 590-basis-point sequential drop from Q3's 43.0%, which management attributed to lower revenue and product mix. The non-GAAP gross margin of 38.0% confirms the pattern.
The guide suggests Q3's margin expansion owed partly to high-margin data center sales that may not repeat. Non-GAAP operating expense guidance of $16.3 billion for the full year shows spending discipline, though GAAP operating expenses of $22.6 billion include $4.3 billion in restructuring charges. The cost base remains in flux.
Capital allocation looks forceful. The $23 billion equity offering, plus $13 billion in new term debt, pushed cash and short-term investments to $54 billion from $37.4 billion at year-end 2025. That liquidity cushions the foundry buildout and the planned Classiq acquisition, but dilutes existing shareholders. Diluted share count rose to 5.31 billion from 4.53 billion a year ago, a 17% increase that will compress per-share metrics even if absolute earnings climb.
Dean Jarnac's appointment as chief sales officer targets go-to-market execution, particularly for the foundry business. External customers beyond Intel's own products remain essential to justifying the capital intensity. The Oracle collaboration for Xeon-based cloud instances and Googlebook devices running Core Ultra Series 3 are concrete wins, though neither moves the needle on foundry profitability yet.
Two questions dominate the outlook. Can DCAI sustain its 78% growth pace as the PC drag intensifies? Will the foundry's operating loss narrow meaningfully? The Q3 beat is genuine. The Q4 guide signals management sees a reset ahead. Whether investors treat the PC slowdown as a temporary inventory correction or something more durable will drive the stock's next move.