Actuals vs. estimates

Highlights & what matters

• Net revenue of $16.51 billion was a Miss against $16.54 billion consensus by 0.1%, while non-GAAP EPS of $0.52 beat the $0.41 consensus; both verdicts carry over from the preliminary.
• The Q4 guide steps down: revenue of $15-16 billion, non-GAAP gross margin of 38% and non-GAAP EPS of $0.25, including roughly $300 million of revenue and 200 basis points of margin from the Fab 28 incident in Israel.
• Data center is running hot: DCAI revenue of $7.3 billion rose 17% sequentially and nearly 80% year over year, DCAI operating profit reached $3 billion, and Q4 DCAI is guided to grow mid-teens percent sequentially.
• Client is in correction: CCPG revenue of $8.1 billion fell 9% sequentially, Q4 CCPG is guided down more than 20%, and Intel now plans for the PC unit TAM to fall about 12% in 2026 and roughly 10% in 2027.
• The one thing that matters: the quarter split into two businesses moving in opposite directions, and the call made clear the client inventory flush and a capital-heavy 2027 with likely negative free cash flow will mask data center strength for at least two quarters.

Guidance & KPIs

Management commentary

• CFO: 2027 is a growth year led by data center, but the first half stays constrained on Intel 3 wafers and substrates, with the 40% added substrate capacity landing mostly in the back half.
• CFO: Q4 and Q1 carry most of the PC inventory correction, possibly stretching into Q2, and "we are not optimistic about next year in terms of memory" as a driver of PC demand.
• CFO: Granite Rapids on Intel 3 is now gross-margin accretive; Panther Lake has improved but is not yet at the corporate average.
• CFO: on gross margin, management still leans toward 40-60 fall-through, implying gross margin expansion in a 2027 growth year, while 18A underloading and lower-margin purpose-built silicon act as headwinds.
• CEO: a couple of advanced packaging customers may be announced in the next two quarters, and the next Intel 14A PDK, following the 0.9 release, is expected by Q1 2027; no foundry customer names were disclosed.

Quality of earnings

• The EPS beat is mostly operational. Non-GAAP EPS of $0.52 against $0.38 guidance came from higher revenue, a 44.1% non-GAAP gross margin about 200 basis points above Q2, and spending discipline; only about $0.01 came from interest income on the August equity offering.
• Per-share comparisons get harder from here. The $23 billion August equity offering lifts the Q4 fully diluted share count to 5.44 billion, a full quarter of new shares, which weighs on the $0.25 Q4 EPS guide.
• Part of foundry's sequential gain does not repeat. External foundry revenue of $411 million rose $118 million sequentially, primarily due to a non-recurring customer program.

Gotchas & watch items

• Fab 28 is a two-quarter hit: management expects a similar roughly $300 million revenue impact in Q1, though most wafer scrap is expected in Q4.
• Free cash flow is likely negative in 2027: the CFO said 2027 is an investment year and probably not one with positive free cash flow, with 2026 gross capex at $20 billion and 2027 up strongly.
• Manufacturing costs are falling faster than the headline shows: Intel 18A costs are down about 40% since Q1 and Intel 3 costs about 15%, with 18A now nearly one-third of client CPU revenue.
• Purpose-built silicon is the fastest grower but dilutes margin: revenue rose more than 50% sequentially and more than doubled year over year, with margins below the corporate average.

Last quarter's watch items: what happened

• No watch items on file from a prior quarter - this is the first tracked quarter for this company.

Next quarter: the 2-3 things that matter

• DCAI keeps growing through the Fab 28 disruption Baseline: Q3 DCAI revenue $7.3 billion, operating profit $3 billion; Q4 guided up mid-teens percent sequentially Confirms: Q4 DCAI revenue grows at least mid-teens percent sequentially despite the roughly $300 million Fab 28 impact Breaks: Q4 DCAI growth below 10% sequentially or a larger Fab 28 impact Check in: Q4 2026. Source: CFO segment results and Q4 outlook
• Client inventory correction bottoms by Q1 Baseline: Q3 CCPG revenue $8.1 billion; Q4 guided down more than 20% sequentially Confirms: Q4 CCPG decline near the guided level and commentary that Q1 is only a seasonal decline Breaks: Q4 CCPG down well beyond 20% or the correction extended past Q2 Check in: Q4 2026. Source: CFO Q4 outlook and answer on inventory correction
• Gross margin recovery from the Q4 trough Baseline: Q3 non-GAAP gross margin 44.1%; Q4 guided at 38% including 200 basis points from Fab 28 Confirms: Q4 non-GAAP gross margin at or above 38% with 18A and Intel 3 cost gains cited Breaks: Q4 non-GAAP gross margin below 38% or further wafer scrap Check in: Q4 2026. Source: CFO Q4 outlook and gross margin Q&A