Earnings call transcript: Intel Q3 2025 beats earnings expectations, stock rises

Intel Corporation reported its third-quarter 2025 earnings, surpassing both revenue and earnings per share expectations. The company’s earnings per share (EPS) came in at $0.23, significantly higher than the forecasted $0.01, marking a 2200% surprise. Revenue reached $13.7 billion, exceeding the anticipated $13.13 billion. Following the announcement, Intel’s stock rose by 3.37% to $36.92 in after-hours trading. According to InvestingPro data, Intel currently appears overvalued based on its Fair Value analysis, with the stock trading at a relatively high EBITDA multiple of 23.75x.

Key Takeaways

• Intel’s Q3 2025 revenue of $13.7 billion surpassed forecasts, showing a 4.34% surprise.
• The company’s EPS of $0.23 exceeded expectations, marking a significant earnings beat.
• Stock price increased by 3.37% post-earnings, reflecting positive investor sentiment.
• Strategic partnerships and innovations, including collaborations with Nvidia, are strengthening Intel’s market position.
• Intel is focusing on AI and advanced computing, projecting significant growth in these areas.

Company Performance

In Q3 2025, Intel demonstrated robust performance with a revenue increase of 6% sequentially. The company’s focus on innovation and strategic collaborations has contributed to its strong quarter. The launch of new products and expansion in AI and computing platforms are positioning Intel for future growth. Compared to previous quarters, Intel’s performance indicates a positive trajectory amid industry challenges.

Financial Highlights

• Revenue: $13.7 billion, up 6% sequentially.
• Earnings per share: $0.23, significantly above the forecasted break-even.
• Non-GAAP Gross Margin: 40%, 4 percentage points above guidance.
• Operating Cash Flow: $2.5 billion.
• Gross CapEx: $3 billion.
• Positive Adjusted Free Cash Flow: $900 million.
• Cash and Short-Term Investments: $30.9 billion.

Earnings vs. Forecast

Intel’s Q3 results outperformed expectations with an EPS of $0.23 compared to the forecasted $0.01, resulting in a 2200% earnings surprise. Revenue also exceeded forecasts, coming in at $13.7 billion against an expected $13.13 billion, a 4.34% upside. This marks a significant improvement compared to previous quarters, where results were closer to forecasts.

Market Reaction

Following the earnings announcement, Intel’s stock rose by 3.37% to $36.92 in after-hours trading. This movement reflects investor confidence in the company’s strategic direction and financial health. The stock’s performance is notable as it approaches its 52-week high of $39.65, indicating positive market sentiment. InvestingPro data shows Intel has delivered impressive returns, with an 84.59% gain year-to-date and a 79.75% surge over the past six months. For deeper insights into Intel’s valuation metrics and more exclusive ProTips, explore the comprehensive Pro Research Report available on InvestingPro.

Outlook & Guidance

Intel has provided a Q4 2025 revenue forecast of $12.8 billion to $13.8 billion, with a gross margin of approximately 36.5%. The company expects a non-GAAP EPS of $0.08. Looking ahead, Intel is planning significant capital investments, projecting over $27 billion in CapEx for 2025, emphasizing its commitment to growth and innovation. InvestingPro analysis indicates a FAIR Financial Health Score of 2.0, with analysts predicting a return to profitability this year. Discover 8 more exclusive ProTips and detailed financial metrics with an InvestingPro subscription.

Executive Commentary

CEO Pat Gelsinger highlighted Intel’s strategic focus, stating, "AI is the next phase of the revolution, and we’re on a path to ensure x86 remains at the heart of it." CFO David Zinsner emphasized the company’s financial health, noting, "We exit Q3 with a significantly stronger balance sheet, solid demand in the near term."

Risks and Challenges

• Supply chain constraints, particularly in Intel 10 and 7 nodes, could impact production.
• Market saturation and competition in the semiconductor industry present ongoing challenges.
• Macroeconomic pressures, including potential fluctuations in global demand, could affect performance.
• The need for continuous innovation in AI and computing to maintain competitive advantage.
• Managing significant capital investments while ensuring profitable returns.

Q&A

During the earnings call, analysts inquired about supply constraints and Intel’s collaboration with Nvidia. The company addressed yield improvements for its 18A process and detailed its AI strategy, highlighting the importance of these initiatives for future growth.

Full transcript - Intel Corporation (INTC) Q3 2025:

Jonathan, Conference Operator: Thank you for standing by and welcome to Intel Corporation’s third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during this session, you’ll need to press star one one on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star one one again. We ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. As a reminder, today’s program is being recorded. Now I’d like to introduce your host for today’s program, John Pitzer, Vice President, Investor Relations. Please go ahead, sir.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Thank you, Jonathan, and good afternoon to everyone joining us today. By now, you should have received a copy of the Q3 earnings release and earnings presentation, both of which are available on our Investor Relations website, intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I am joined today by our CEO, Pat Gelsinger, and our CFO, David Zinsner. Pat will open up with comments on our third quarter results, as well as provide an update on our progress implementing strategic priorities. Dave will then discuss our overall financial results, including fourth quarter guidance, before we transition to answer your questions. Before we begin, please note that today’s discussion contains forward-looking statements based on the environment as we currently see it, and as such, are subject to various risks and uncertainties.

It also contains references to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent annual report on Form 10-K, and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures, including reconciliations where appropriate to our corresponding GAAP financial measures. With that, let me turn things over to Pat.

Pat Gelsinger, CEO, Intel Corporation: Thank you, John, and let me add my welcome this afternoon. We delivered a solid Q3 with revenue, gross margin, and earnings per share above guidance. This marks the fourth consecutive quarter of improved execution delivered by the underlying growth in our core markets and the steady progress we are making to rebuild the company. While we are still a long way to go, we are taking the right steps to create sustainable shareholder value. We significantly improved our cash position and liquidity in Q3, a key focus for me since becoming CEO in March. This includes accelerated funding from the U.S. government, important investments from Nvidia and SoftBank Group, and monetizing a portion of Altera and Mobilize. The action we took to strengthen the balance sheet gave us greater operational flexibility and positioned us well to continue to execute our strategy with confidence.

In particular, I’m honored by the trust and confidence President Trump and Secretary Lafnick have placed in me. Their support highlights Intel’s strategic role as the only U.S.-based semiconductor company with leading-edge logic R&D and manufacturing. We are fully committed to advancing the Trump administration’s vision to restoring semiconductor production and proudly welcome the U.S. government as essential partners in our efforts. We also made tangible progress to improve our execution this quarter. We remain on track not only to right-size the company by year-end, but also to evolve the talent mix, reestablish the engineering-first mindset, and optimize the executive and management levels across the organization. We are seeing a significant increase in day-to-day energy and collaboration as our employees return to office after a substandard period of remote and hybrid work. Let me dive deeper into our underlying business trend.

Over the course of my career, I have had the privilege of contributing to multiple waves of disruptive innovation. I can’t recall a time when I have been more excited about the future of computing and opportunities in front of us. We are still in the early stage of the AI revolution, and I believe Intel can and will play a much more significant role as we transform the company. This starts with our core x86 franchise, which continues to play a critical role in the age of AI. AI is clearly accelerating demand for new compute architectures, hardware, models, and algorithms. At the same time, it’s fueling renewed growth of traditional compute as the underlying data and the resulting insights continue to rely heavily on our existing products from cloud to edge.

AI is driving near-term upside to our business, and it is a strong foundation for sustainable long-term growth as we execute. In addition, with unmatched compatibility, security, and flexibility, by virtue of being the largest install base of general-purpose compute, x86 is well-positioned to power the hybrid compute environment that AI workloads demand, particularly for inference, edge workloads, and agentic systems. It is a great starting point from which to rebuild our market position to revitalizing and rejuvenating the x86 ISA and positioning it for the new era of computing with great products and partnerships. Our collaboration with Nvidia is a prime example. We are joining forces to create a new class of products and experience spanning multiple generations that accelerate the adoption of AI for the hyperscale, enterprise, and consumer markets.

By connecting our architectures through Nvidia NVLink, we combine Intel CPU and x86 leadership with Nvidia unmatched AI and accelerated computing strengths, unlocking innovative solutions that will deliver better customer experience and provide a beachhead for Intel in the leading AI platform of tomorrow. We need to continue to build on this momentum and capitalize on our position by improving our engineering and design execution. This includes hiring, promoting top architecture talents, as well as reimagining our core roadmap to ensure it is the best-in-class features. To accelerate this effort, we recently created the Central Engineering Group, which will unify our horizontal engineering functions to drive leverage across foundational IP development, test chip design, EDA tools, and design platforms. This new structure will eliminate duplications, improve time to decision-making, and enhance coherence across all product development.

In addition, and just as important, the group will spearhead the build-out of a new ASIC and design service business to deliver purpose-built silicon for a broad range of external customers. This will not only extend the reach of our core x86 IP, but also leverage our design strengths to deliver an array of solutions from general purpose to fixed-function computing. In client, we are on track to launch our first Panther Lake SKU by year-end, followed by additional SKUs in the first half of next year. This will help us to solidify our strong position in the notebook segment across both consumer and enterprise with cost-optimized products. Across our full PC stack, from our entry-level offering to our mainstream Core family, up to our highest performing Core Ultra family. In high-end desktop, competition remains intense, but we are making steady progress.

Arrow Lake shipments have increased throughout the year, and our next-generation Nova Lake product will bring new architectural and software upgrades to further strengthen our offerings, particularly in the PC gaming halo space. With this lineup, we believe we will have the strongest PC portfolio in years. In traditional servers, AI workloads are driving both refresh of the install base and capacity expansion, fueled by rapid growth in tokenization, the increased demands around data storage and processing, and the need to elevate power and space constraints. We remain the AI head nodes of choice, with strong demand for Granite Rapids, including instances across every major hyperscaler. We are listening to what customers need, and strong performance per watt and TCO are top of mind. As I shared with you last quarter, the key part is improving our multi-threading capabilities as we close existing gaps and work to regain shares.

Finally, on our AI accelerator strategy, I continue to believe that we can play a meaningful role in developing compute platforms for emerging inference workloads driven by agentic AI and physical AI. This will be a far larger market than that for AI training workloads. We will work to position Intel as a compute platform of choice for AI inference, and we look to partner with a range of incumbents, as well as emerging companies that are defining this new compute paradigm. This is a multi-year initiative, and we will strike a partnership when we can deliver true differentiation and market-leading products. In the near term, we will continue delivering AI capabilities through Xeon AI PCs, Arc GPUs, and our open software stack. Looking ahead, we plan to launch successive generations of inference-optimized GPUs on the annual cadence that features enhanced memory and bandwidth to meet enterprise needs.

Turning to Intel Foundry, our momentum continues. We are making steady progress on Intel 18A. We are on track to bring Panther Lake to market this year. Intel 18A yields are progressing at a predictable rate, and Fab 52 in Arizona, which is dedicated to high-volume manufacturing, is now fully operational. In addition, we are advancing our work on Intel 18A, and we continue to hit our PDK milestones. Our Intel 18A family is the foundation for at least the next three generations of client and server products. Our work with the U.S. government, within the secure enclave, and other committed customers. It is a critical node that will drive wafer volumes well into the next decade and generate a healthy return on our investment. On Intel 14A, the team continues to focus on technology definition, transistor architecture, process flow, design enablement, and foundation IPs.

We remain active, engaged with potential external customers, and are encouraged by the earlier feedback, which helps us to drive and inform our decisions. Lastly, our advanced packaging activities continue to progress well, especially in the area like EMIB and EMIB-T, which we have true differentiation. Like our Intel products, my conviction in the market potential for Intel Foundry continues to grow. The rapid expansion of critical AI infrastructure is fueling unprecedented demand for wafer capacity and advanced packaging services that present a substantial opportunity demanding multiple suppliers. Intel Foundry is uniquely positioned to capitalize on this unprecedented demand as we execute. As I mentioned last quarter, our investment in Foundry will be disciplined, and we will focus on capability and scalability, giving us flexibility to ramp quickly, and we will only add capacity when we have committed external demand.

Building a world-class Foundry is a long-term effort founded on trust. As a Foundry, we need to ensure that our process can be easily used by a variety of customers, each with their unique way of building their own products. We must learn to delight our customers as they count on us to build wafers to meet all their needs for power, performance, yield, cost, and schedule. It is only by doing this that they can rely on us as a true long-term partner to ensure their success. This requires a change of mindset that I’m driving across Intel Foundry as we position this business for long-term success. As we look ahead, my focus remains firmly on the long-term opportunity across every market we serve today and those we will enter tomorrow.

Our strategy is crystallized around our unique strengths and value proposition, supported by the accelerating and unprecedented demand for compute in the AI-driven economy. Our leadership continues to strengthen. Our culture is becoming more accountable, collaborative, and execution-oriented, and my confidence in the future grows stronger every day. I look forward to keeping you updated as we advance our journey. I will now turn it over to David Zinsner for details on our current business trends and financials.

David Zinsner, CFO, Intel Corporation: Thank you, Lip-Bu. In Q3, we delivered the fourth consecutive quarter of revenue above our guidance, driven by continued strength in our core markets. Although we remain vigilant regarding macroeconomic volatility, customer purchasing behavior and inventory levels are healthy, and industry supply has tightened materially. Furthermore, we are increasingly confident that the rapid adoption of AI is driving growth in traditional compute and reinforcing momentum across our businesses. In client, we are five years post the COVID pull forward and are benefiting from the refresh of a larger installed base. Enterprises continue to migrate to Windows 11, and AI PC adoption is growing. In data center, the accelerating build-out of AI infrastructure is positive for server CPU demand from head nodes, inference, orchestration layers, and storage.

We are cautiously optimistic that the CPU TAM will continue to grow in 2026, even as we have work to do to improve our competitive position. Third quarter revenue was $13.7 billion, coming in above the high end of our guidance range and up 6% sequentially. Capacity constraints, especially on Intel 10 and Intel 7, limited our ability to fully meet demand in Q3 for both data center and client products. Non-GAAP gross margin was 40%, four percentage points better than our guidance on higher revenue, a more favorable mix, and lower inventory reserves, partially offset by higher volume of Lunar Lake and the early ramp of Intel 18A. We delivered third quarter earnings per share of $0.23 versus our guidance of break-even EPS, driven by higher revenue, stronger gross margin, and continued cost discipline.

Q3 operating cash flow was $2.5 billion, with gross CapEx of $3 billion in the quarter and positive adjusted free cash flow of $900 million. One of our top priorities for 2025 was shoring up our balance sheet. To that end, we executed on deals to secure roughly $20 billion of cash, including three important strategic partnerships. We exited Q3 with $30.9 billion of cash and short-term investments. In Q3, we received $5.7 billion from the U.S. government, $2 billion from SoftBank Group, $4.3 billion from the Altera closure, and $900 million from the Mobilize stake sale. We expect Nvidia’s $5 billion investment to close by the end of Q4. Finally, we repaid $4.3 billion of debt in the quarter, and we will continue prioritizing deleveraging by paying maturities as they come due in 2026.

Moving to segment results for Q3, Intel products revenue was $12.7 billion, up 7% sequentially and above our expectations across client and server. The team executed well to support upside in the quarter, given the current tight capacity environment, which we expect to persist into 2026. We are working closely with customers to maximize our available output, including adjusting pricing and mix to shift demand towards products where we have supply and they have demand. CCG revenue was $8.5 billion, up 8% quarter over quarter and above our expectation due to a seasonally stronger TAM, Windows 11-driven refresh, and a stronger pricing mix with the ramp of Lunar Lake and Arrow Lake. Within the quarter, CCG further advanced its relationship with Microsoft through a collaboration with Windows ML and the deep integration of Intel vPro manageability, with Microsoft Intune enabling secure, cloud-connected fleet management for businesses of all sizes.

The team also met all key milestones in support of launching Core Ultra 3, codenamed Panther Lake. We expect the client consumption TAM to approach 290 million units in 2025, marking two straight years of growth, up the post-COVID bottom in 2023. This represents the fastest TAM growth since 2021, and we’re prudently preparing for another year of strong demand in 2026 as Core Ultra 3 ramps into a healthy PC ecosystem. TCAI revenue was $4.1 billion, up 5% sequentially, above expectations, driven by improved product mix and higher enterprise demand. The strength in host CPUs for AI servers and storage compute continued in the quarter, even as supply constraints limited additional upside. Our latest Xeon 6 processors, codenamed Granite Rapids, offer significant benefits, including up to 68% TCO savings and up to 80% less power as compared to the average server installed today.

It is increasingly clear that CPUs play a critical role today and will going forward within the AI data center as AI usage expands and especially as inference workloads outpace that of training. Some data center customers are beginning to ask about longer-term strategic supply agreements to support their business goals due to the rapid expansion of AI infrastructure. This dynamic, combined with the underinvestment in traditional infrastructure over the last couple of years, should enable the revenue TAM for server CPUs to comfortably grow going forward. Operating profit for Intel products was $3.7 billion, 29% of revenue, and up $972 million quarter over quarter on stronger product margin, lower operating expenses, and a favorable compare due to period costs in Q2. Before discussing Intel Foundry, I want to acknowledge the tireless effort of the Nvidia and Intel teams.

There’s a lot of work in front of us, but the collaboration we announced this quarter was the culmination of almost a year of hard work with a company that cuts no corners and prioritizes engineering excellence above all. The x86 architecture has been the foundation of the digital revolution that powers the modern world. AI is the next phase of that revolution, and we’re on a path to ensure x86 remains at the heart of it. Engagements like this one with Nvidia are critical to this effort. Moving to Intel Foundry, Intel Foundry delivered revenue of $4.2 billion, down 4% sequentially. In Q3, Intel Foundry delivered Intel 10 and 7 volume above expectations, met key 18A milestones, and released hardened 18A PDKs to the ecosystem. Foundry also advanced the development of Intel 14A and continues to make progress, expanding its advanced packaging deal pipeline.

Intel Foundry operating loss in Q3 was $2.3 billion, better by $847 million sequentially, primarily on favorable comparison due to the approximately $800 million impairment charge in Q2. As Lip-Bu Tan discussed, our confidence in the long-term Foundry TAM continues to grow, bolstered by accelerating deployment and adoption of AI and the growing need for wafers and advanced packaging services. Projections are calling for a greater than 10X increase of gigawatts of AI capacity by 2030, creating significant opportunities for Intel Foundry with external customers, both for wafers and our differentiated advanced packaging capabilities like EMIB-T. We continue the work to earn the trust of our customers, and our improved balance sheet flexibility will allow us to quickly and responsibly respond to demand as it comes.

Turning to All Other, revenue came in at $1 billion, of which Altera contributed $386 million and was down 6% sequentially due to the intra-quarter closure of Altera. The three primary components of All Other in Q3 were Mobilize, Altera, and IMS. Collectively, the category delivered $100 million of operating profit. Now turning to guidance. For Q4, we’re forecasting a revenue range of $12.8 to $13.8 billion. At the midpoint and adjusting for the Altera de-consolidation, Q4’s revenue is roughly flat quarter over quarter. We expect Intel products up modestly sequentially, but below customer demand as we continue to navigate a tight supply environment. Within Intel products, we expect CCG to be down modestly and DCAI to be up strongly sequentially as we prioritize wafer capacity for server shipments over entry-level client parts.

We expect Intel Foundry revenue up quarter over quarter on increased Intel 18A revenue and its external Foundry revenue up due to the de-consolidation of Altera. For All Other, which now excludes Altera, we expect revenue to decline consistent with Mobilize guidance, partially offset by sequential growth in IMS. At the midpoint of $13.3 billion, we forecast a gross margin of approximately 36.5% down sequentially due to product mix, the impact of the first shipments of Core Ultra 3, which has the typically higher cost you see in the early stages of a new product ramp, and the de-consolidation of Altera. We forecast a tax rate of 12% and EPS of $0.08, all on a non-GAAP basis. We expect non-controlled income to be approximately $350 to $400 million in Q4 on a GAAP basis, and we forecast an average fully diluted share count of roughly 5 billion shares for Q4.

Moving to CapEx, we continue to anticipate 2025 gross capital investment will be approximately $18 billion, and we expect to deploy more than $27 billion of CapEx in 2025 versus $17 billion deployed in 2024. I’ll wrap up by saying we exit Q3 with a significantly stronger balance sheet, solid demand in the near term, and growing confidence in our core x86 franchise, as well as the longer-term opportunities in Foundry, ASICs, and accelerators. We also recognize the work we need to do to reach our full potential. We continue to add external talent and unlock our workforce to improve our execution across product and process development, as well as manufacturing. We will closely manage what’s in our control, react quickly as the environment evolves, and focus on delivering long-term shareholder value. At this time, I’ll turn it back to John to start the Q&A.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Thank you, Dave. We will now transition to the Q&A portion of our call. As a reminder, we ask each of you to ask one question and a brief follow-up where applicable. With that, Jonathan, can we take the first question, please?

Jonathan, Conference Operator: Certainly, our first question comes from the line of Ross Seymore from Deutsche Bank. Your question, please.

Hi guys, thanks for letting me ask your question and congratulations on the strong results. Pat, the first one for you is going to be on the Foundry side. You guys announced a ton of collaborations in the quarter. You very much strengthened your balance sheet, and the tone you took in your preamble sounds much more confident on the progress you’re making in Foundry. Do any of these collaborative announcements or equity investments go into that increased confidence, or are there some sort of technical merits that you’re seeing that are rising your optimism in that part of your business?

Pat Gelsinger, CEO, Intel Corporation: Yeah, Ross, thank you so much for the questions. I think a couple of announcements we make is, I think, clearly more on the product side. One is the SoftBank because they’re building up all the infrastructure, AI infrastructure that definitely would need more capacity on the Foundry side. I think that would be the answer. Meanwhile, I think saying that, you know, I think clearly from what I receive from the 18A and 14A, we make tremendous good progress. You know, the steady progress on 18A, and Panther Lake would depend on it. Clearly we see the yield in a more predictable way. I visit Fab 52 that, you know, fully in operation for the 18A. On the 14A, clearly we’re engaging with multiple customers in terms of milestone basis. We also really driving some of the yield and performance reliability that I’m seeing improvement.

Also more exciting, the advanced packaging, we also see important demands from some of the key customers from Foundry, from the cloud able, and also enterprise side. I think overall, I think we’re looking quite excited to build this long-term trust with some of the customers and scaling it. We also focus on hiring some of the top talent, driving some of the process technology improvement.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Ross, do you have a follow-up question?

Yeah, I do. One for Dave on the gross margin side of things. You talked through the upside in the third quarter and the sequential downside in the fourth. Could you just walk us through some of the pluses and minuses as we think about 2026, just kind of directionally? I guess where I’m going is it seems like the biggest improvement has to come on the Foundry gross margin side of things. Is that the biggest driver? What drives it? As those gross margins go up, does that have any impact on the Intel products gross margin?

David Zinsner, CFO, Intel Corporation: Yeah, sure, Russ. Obviously we’re not going to guide 2026, but I think I can give a little bit of color. First of all, just be mindful that Altera is out of the numbers in 2026. They were in a large part of the numbers for 2025. That’s probably a point of margin headwind for us because they were accretive to our gross margins. That’s going to be a little bit of a challenge to overcome. I’d say we still believe in this 40% to 60% fall through for margins. Of course, it’s a little bit of a range you could drive a truck through, quite honestly. A lot of it’s because of mix. We’ll have, obviously, Lunar Lake will be a big component at least in the first half of the year, and that is a dilutive product to us.

Panther Lake, while obviously is going to be a great cost structure for us over time, given the wafers are fabbed internally, initially, when you got a new product on a new process, they’re pretty expensive products to start with. It’s dilutive in the beginnings of the year, and then it gets better over the course of the year. I do agree we should see gross margins improve on the Foundry side for sure. Partly that is the scale dynamic that we will see benefit from. Also, as we move towards more leading edge mix, 18A for sure, but also even Intel 4 or 3, those products have better pricing and a better cost structure. Those margins should be accretive. The dynamic about how much it improves will largely be a function of how the mix plays out through the year.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes from the line of Joseph Moore from Morgan Stanley. Your question, please.

Great, thank you. I was really interested in a lot of the prepared remarks around the sort of differences to your approach to Foundry. You talked about this last quarter and this quarter that you’re sort of looking for customer commitments before you make the investment. Can you just talk about how those conversations are going? I certainly, you know, I can see the trade-off from a customer standpoint. They’re making a commitment to you. Do they expect that capacity to be built ahead of time? Is there a bit of a chicken and egg aspect to these investments and just how are you approaching those conversations?

Pat Gelsinger, CEO, Intel Corporation: Yeah, Joseph, thank you so much for the question. I think on the Foundry side, clearly we are engaging with multiple customers. As the building the trust of the customer, you need to really show the yield improvement, reliability, and also you need to have all the, you know, specific IP that they require. It’s a service industry. You need to have all the right IP. That’s why I formed the central engineering to get all the right IP to matching with the customer requirement. I think the best way is really, you know, show the performance, the yield, and then we can attach chip so that they can really work on it. Then they can start to deploy their most important revenue wafer to depend on us so that we can drive that success for them. I think those are very important.

In terms of potential investment and collaboration, I think with the different customers, different requirements, we’re working with them. More important is to get their commitment to the Foundry and the support. I think that’s building the trust that’s more important.

David Zinsner, CFO, Intel Corporation: Yeah, maybe just to add on, I would say that, you know, I think customers understand that it takes time from the time you deploy capital to the time where you have output. Our expectation is we, you know, we’ll get those commitments firmed up in time to deploy the capital in time to meet the demand. I’d also say we’re in a reasonably decent position given the CapEx investments we’ve already made. We have a lot of the assets on the books and in what we call assets under construction. We’ve made a lot of investments around the shell space. We do see line of sight to driving a reasonable amount of supply for our external foundry customers with our existing footprint and quite honestly with the use of the assets under construction and reuse of equipment that we have on the books today. I think we have flexibility.

Obviously, if things go better, you know, we may be looking to invest more and do that more quickly, but we feel reasonably confident we can react to the situation.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Joe, do you have a follow-up question?

I do, yeah. Separately, the supply constraints in server CPUs and other CPUs, we see those in the market. I guess, you know, but your growth was 5% sequentially, single-digit growth year on year. I guess where is the shortage coming from? Is there just better demand ahead that you’re not able to meet? Is it some of the transitions that you guys have made? I certainly see that tightness in the marketplace. I’m not arguing with it, but I’m just curious, you know, where you see that shortage coming from and how it’ll get resolved.

David Zinsner, CFO, Intel Corporation: Yeah, I mean, the shortage is pretty much across our business, I would say. We are definitely tight on Intel 10 and 7. Obviously, we’re not looking to build more capacity there, and as we get more demand, we’re constrained. In some ways, we’re living off of inventory. We’re also trying to kind of demand shape to get customers to other products. There’s also shortages even beyond our specific challenges on the Foundry side. I think there’s widely reported substrate shortages, for example. Obviously, I think the demand, there’s a lot of caution coming into the year, I think, across the board. It looks like things are going to be stronger this year, and probably that continues well into next year. I think everybody is trying to manage through it.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes to the line of CJ Muse from Cantor Fitzgerald. Your question, please.

Yeah, good afternoon. Thank you for taking the question. I guess a follow-up on the current outlook for demand outpacing supply into 2026. Curious if that’s a comment largely focused on server or also including clients. I guess depending on your thoughts there, how should we be thinking about Q1 trends versus normal seasonality, which typically I guess would be down high single digits, low double digits?

David Zinsner, CFO, Intel Corporation: Yeah, it’s both. Although, as we said, you know, we are yielding a bit of the small core market in client to fulfill customer requirements more broadly on the client space and more specifically in the server space. That’s how we’re kind of trying to manage it. As you look into Q1, obviously, this is something we’ll probably give you a lot more color around in January. I would just say, we may actually be at our peak in terms of shortages in the first quarter because we’ve lived through Q3 and Q4 with a little bit of inventory to help us and just cranking the output as much as we could with the factory. We probably won’t have as much of that luxury in Q1. I’m not sure we’ll buck the trend on seasonality given the fact that we’re going to be really, really tight in the first quarter.

After that, I think we’ll start to see some improvements and we can get ourselves caught up as we get through the rest of the year.

John Pitzer, Vice President, Investor Relations, Intel Corporation: CJ, do you have a follow-up question?

I do, John. Thank you. I guess given the investments from the U.S. government and Nvidia, SoftBank, etc., I’m curious with that improved cash position and liquidity, how has your thinking evolved in terms of investments in either CapEx or making other investments in your product businesses?

David Zinsner, CFO, Intel Corporation: Yeah, I mean, obviously we’re in a great position. I’d say, you know, as we think about this cash, our first focus is to delever. That’s one of the things we really wanted to, you know, when Pat came in, he really was upset about Foundry. We’ve done a lot to work on that and improve that for him. We took $4.3 billion of debt off the books this quarter, and all the maturities next quarter or next year should come off, and we’ll repay that. I think as you look at CapEx, it puts us in a position of flexibility on CapEx, but we want to be very disciplined around CapEx. We will absolutely be looking at demand. Pat’s been very direct with us on this. He wants to see the whites of the eyes of the customer that we can believe in that demand.

If that demand exists, of course, we will amp up the CapEx as necessary. As you think about investment, we still think that $16 billion of CapEx investment for next year is the right amount. Although Pat and I are constantly now looking at how we mix that $16 billion to drive the best possible growth and return for investors, and we will be making those changes. Beyond that, we’ll see how things go. We want to be pretty disciplined about our OpEx as a % of revenue and drive leverage. We do see opportunities to make investments that can, I think, deliver great returns for shareholders, and we’re not afraid to do that either.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes from the line of Blaine Curtis from Jefferies. Your question, please.

Hey guys, thanks. I had two. Just on the CapEx, I think you reiterated $18 billion, but I think you spent, I guess, less than I was modeling Q3. Is that really still a number? I’m just kind of curious, as you start to ramp this 18A in Arizona, is there a way to think about the timing of when you add capacity there?

David Zinsner, CFO, Intel Corporation: On the $18 billion, yeah, I think that’s still the number. Obviously, CapEx can be lumpy. It depends on when things get, you know, when all the requirements associated with paying the invoice are completed. That’s when we make the payments. We would expect to be somewhere in that range. Obviously, you know, there’s an error bar around that. It might be a little bit less or a little bit more than that. 18A, you know, we still have to ramp this. I wouldn’t expect significant capacity increases in the near term. I think, as we said, we are not at peak supply for 18A. In fact, we don’t get there until the end of the decade. We do think that this node will be a fairly long-lived node for us. We will continue to make investments on 18A over time.

There will be CapEx investments next year, but I wouldn’t expect the supply to, at least, capacity to significantly change vis-à-vis our expectations right now.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Blaine, do you have a quick call?

Yeah, thanks, John. I wanted to follow up on the gross margin trajectory as 18A layers in. I know, you know, comparing it to probably the prior couple of nodes, not a great compare, but maybe to a successful one. When you say yields are in a good spot and improving, is there a way to think about where those 18A yields are versus a successful product that you’ve seen in your history and, you know, kind of thinking about how that layers in in the first half?

David Zinsner, CFO, Intel Corporation: Yeah, I would say in general, I’m not sure yields in older nodes have been a big focus of ours, quite honestly. We’re blazing a new trail on this. Yields are, what I would say, the yields are adequate to address the supply, but they are not where we need them to be in order to drive the appropriate level of margins. By the end of next year, we’ll probably be in that space. Certainly the year after that, I think they’ll be in what would be kind of an industry-acceptable level on the yields. I would tell you on Intel 14A, we’re off to a great start. If you look at Intel 14A in terms of its maturity relative to Intel 18A at that same point of maturity, we’re better in terms of performance and yield. We’re off to an even better start on Intel 14A.

We just got to, you know, kind of continue that progress.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes from the line of Stacy Rasgon from Bernstein Research. Your question, please.

Hi guys, thanks for taking my questions. I wanted to go back and ask about these supply constraints again. You talked a lot about how AI was driving a lot of demand across servers and across PCs, but at the same time, it doesn’t look like customers want your AI products. In fact, they can’t get enough of the older stuff. I guess, I mean, you must have plenty of supply for Granite and for Meteor and even for Lunar Lake. How are you going to get the customers off of the older products where they haven’t shown any desire to get off of them so far, even given the constraints that they’ve been under? I guess, how do we think about the transition of those customers? You’re clearly, I mean, you even said it yourself, you’re not adding any more of the older capacity.

In fact, you took some of it offline, right?

David Zinsner, CFO, Intel Corporation: Yeah, good question, Stacy. I would, you know, I think it’s a misnomer to say AI hasn’t done well. I mean, it was sequentially up double digits quarter over quarter. We talked about a number of about, you know, we would ship about 100 million units by the end of this year on AI PC, and we’re going to be first order in that range. I think it’s going pretty well. Clearly, though, the older nodes have also done well, and that was probably the part that was more unexpected. I think we’ve just got to participate in making sure that the ecosystem drives enough applications for AI in the PC space. We work with the ISVs regularly to drive that. They’re getting there. It’s, you know, like any market, it starts relatively immature and kind of builds out over time.

Even in our company, we’re starting to find uses for AI PCs. In fact, IR is coming up with one here that we’ll be using. I think it’s just kind of time. That said, what clearly is happening is the Windows refresh is happening more significantly than I think we expected. That’s not necessarily an AI PC story. Raptor Lake is also a product that addresses that. We’re just seeing upside in that part of the market as well.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Stacy, do you have a follow-up?

I do, thank you. Dave, I want to follow up on two things that I think I heard you say on 18A. I thought I heard you say, number one, that yields would not be in a great place, at least until the end of next year. I thought I also heard you say that we’re not going to be adding a lot of 18A capacity next year. Did I hear those wrong? I mean, how can, especially the latter one, how can that be true if you’re ramping Panther? Or is that like a consequence?

David Zinsner, CFO, Intel Corporation: We’re obviously at our infancy. What I’m saying is, you know, relative to the CapEx plan, it’s not like we’re going to incrementally add supply for Intel 18A next year. Yes, of course, we’re going to be ramping the volume over the course of the next year. I wouldn’t say Intel 18A yields are in a bad place. They’re where we want them to be at this point. We had a goal for the end of the year, and they’re going to hit that goal. To be fully accretive in terms of the cost structure of Intel 18A, we need the yields to be better. That’s like every process. That’s what happens. It’s going to take all of next year, I think, to really get to a place where that’s the case.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes from the line of Joshua Buchalter from TD Cowen. Your question, please.

Hey guys, thank you for taking my question. I wanted to ask about some comments Lip-Bu Tan made in the prepared remarks about fixed function computing and potentially supporting more ASICs. Could you provide more context on the scope of this? Is this for potential foundry customers or are these products? If it’s products, what types of applications do you expect to be supporting with custom silicon? Thank you.

Pat Gelsinger, CEO, Intel Corporation: Good question. I think first of all, I just mentioned about the central engineering. We are driving the ASIC design, and that will be enhanced. Actually, it’s a good opportunity for us to enhance, extend our reach of the core x86 IP, and also drive some of the purpose-built silicon for some of our system and cloud player and customer. Definitely, with the Foundry and packaging, also, that will be helping us in terms of their requirement. In all, I think this AI will be driving a lot of growth, especially in the double down of the Moore’s Law. That will help us a lot in our x86 uplift. There’s an opportunity for us to build that whole ASIC design to serve some of the customer requirements.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Josh, do you have a quick follow-up?

Yeah, on the last quarter, obviously the disclosure that, you know, you may decide to abandon 14A got a lot of attention. I just wanted to ask, you know, given your balance sheet is in a lot different spot than it was three months ago, has anything changed from that regard? I mean, I don’t think the Q is out, so I haven’t seen if any of the language changed there. I was curious if anything had moved around since last quarter, given all the changes in your balance sheet. Thank you.

Pat Gelsinger, CEO, Intel Corporation: Yeah, since the last quarter, I think clearly our engagement with the customer for 14A has increased. We are very heavily engaging with the customer in terms of defining the technology, the process, the yield, and the IP requirement to serve them. They clearly see the tremendous demand that they need to have Intel to be strong on the 14A. We are delighted and more confident. Meanwhile, we’re also attracting some of the key talent for the process technology that can really drive success. That’s why it gave me a lot of more confidence to drive that.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes from the line of Ben Reitz from Melius. Your question, please.

Hey, thanks guys. Lip-Bu, can we get an update on the Nvidia relationship, timing of products? Have you gotten any feedback from customers in terms of your ability to articulate on the materiality of the relationship and in terms of timing and materiality or any other color you want to give us on that? Thanks so much.

Pat Gelsinger, CEO, Intel Corporation: Thank you. This is a very important collaboration with Nvidia. It’s a great company, as you guys know. I’ve been, you know, as a friend of Jensen for more than 30 years. We are very excited about this effort of Intel CPU 86 leadership and their unmatched AI and accelerated computing, then connecting with their NVLink. That will really create a new class of product in the multi-generations. This is something that is very heavy engineering to engineering engagement. That will be driving some of the new products that custom data center and PC products, and that really optimized for the AI era. I think all in all, I think this is going to be multiple years of engagement and then addressing a market that we are excited and also driving some of the requirements for the AI infrastructure.

David Zinsner, CFO, Intel Corporation: Maybe just one more addition. What makes this really special for us is it’s not attacking our existing TAM. It’s an incremental opportunity for us to expand the TAM. These are great opportunities for us.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Ben, do you have a follow-up?

Yeah, thanks, John. Lip-Bu, you mentioned a little bit about your AI strategy now, you know, to attack the inference market and that there’s, you see room for, you know, Intel solutions. It sounds like you’re going to partner a lot there. Is this strategy more about partnering? Is it more about, is there a specific Intel IP, you know, for inferencing that you’re excited about? Or is it more of a Switzerland approach where you could partner with a lot of the existing players out there to attack more of the TAM? Thanks.

Pat Gelsinger, CEO, Intel Corporation: Yeah, good question. I think with the AI driving a lot of growth, we definitely want to play in that. I think this is a very early ending, and that’s an opportunity for us. One area that we are focused on is revitalizing our x86 and to really tailor to purpose-built CPU, GPU requirements for the new AI workload. Then really addressing the power-efficient agentic and managing all the different agents. This is a new way of compute platform of choice, and that will be also applying to the system and software. You’re going to say too, I think we’re going to be partnering with some of the incumbents and also the emerging companies that are driving some of these changes.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Jonathan, can we have the next question, please?

Jonathan, Conference Operator: Certainly, our next question comes from the line of Timothy Arcuri from UBS. Your question, please.

Thanks a lot. Dave, it’s not that often we see high fixed cost businesses that are constrained, that have gross margins less than 40%. I certainly get that most of this is because of the wafer costs for Intel 10 and 7, and you still have low yields on 18A. I’m wondering, and this is probably a hard question to ask or to answer, but I wonder if you could maybe just kind of fast forward a bit and say like, what would gross margin be if you were off of 10 and 7 and you were on 18A? Is there a way you could like normalize it for us?

David Zinsner, CFO, Intel Corporation: Yeah, I mean, obviously you may be listening in on some of my conversations with the team here, because that’s definitely something I’ve been making the point of. I would say there’s two dynamics, one of which you’re hitting on, and that is the high cost of older processes versus the better cost structure for the newer processes. That’s obviously meaningful. I mean, we’re in negative gross margin territory for Foundry. That makes a meaningful improvement if you move even into the positive territory. The other aspect of our gross margins is a function of just the product quality. We’re in reasonably decent shape on client in terms of product performance and competitiveness, with a few exceptions, but we’re not where we need to be on a cost basis. We’ve got to make improvements there. We have that on the roadmap.

The team recognizes it, but that’s a multi-year process to get there. It’s more pronounced on the data center side. Not only do we not have the right cost structure, but we also don’t have the right competitiveness to really get the right margins from our customers. We’ve got work to do there. That’s what Lip-Bu and the team he’s pulled in are hyper-focused on, is getting great products at the right cost structure to try better gross margins. That to me, I think, is the linchpin in all this. The improvements on the Foundry side are just going to come, I think. We’re going to mix higher and higher to Intel 3, 4, and then, 18A and ultimately 14A. The cost structures of all of those are actually pretty similar.

It’ll just be a function of the fact that the value that’s provided by those leading edge nodes is going to be significantly more, and that’s going to just materially drive the gross margins up. The other thing that I would say is we are seeing a lot of startup costs by virtue of the fact that we’ve jammed a whole bunch of new processes in kind of in rapid fashion. As we get into 14A, our cadence will be more normalized, and you won’t see so much startup costs stacked on top of each other, which is affecting our gross margins. That’s billions of dollars. I think, as you get beyond a few years, that rolls off and will also help.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Tim, do you have a quick follow-up?

I do, yeah. Lip-Bu, you didn’t give an update last call on Diamond Rapids’ launch date. I know the whole, you know, roadmap’s under review, but you did sound, you know, the company sounds fairly optimistic about Coral Rapids. Can you just give us sort of an update on the data center roadmap a bit here? Thanks.

Pat Gelsinger, CEO, Intel Corporation: Thank you. Good questions. I think clearly the Diamond Rapids are getting stronger hyperscale feedback. We also focus on the new product, the Coral Rapids. That will include the SMT, the micro threading, and that can drive higher performance. We are in the definition stage, and we will work out the roadmap, and we are going to execute that. That will be going forward.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Thanks, Tim. Jonathan, we have time for one last question.

Jonathan, Conference Operator: Certainly, our final question for today comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Yeah, thanks for fitting me in here. Just a couple of real quick ones. I guess going back to the Nvidia relationship, I can appreciate that the announcement was really tied to the NVLink fusion strategy and integrating that with the x86 ecosystem. I think there’s been also some recent reports about maybe using Gaudi for some dedicated inference workloads within a stack of Nvidia. How do you, you know, is this relationship, you know, a starting point, and should we expect to see more potential integration beyond NVLink going forward?

Pat Gelsinger, CEO, Intel Corporation: Yeah, I think, let me answer that. I think NVLink is kind of more the hub to connecting the x86 and GPU. In terms of the AI strategy, we clearly are defining the, you know, Crescent Island that we talked about. We also have a new product line in the lineup. They’re addressing the agentic and the physical AI and more in the inference side. I think stay tuned. We will update that.

John Pitzer, Vice President, Investor Relations, Intel Corporation: Aaron, do you have a quick follow-up?

I do, and I’ll make it really short. You know, can you just update us on how we think about the NCI, the non-controlling interest expense, as we look through this year and think about that? I think you’ve given some comments in the past of how we should think about that in the 2026. Thank you.

David Zinsner, CFO, Intel Corporation: Yeah, I think 2026, we’re looking at somewhere in the $1.2 billion to $1.4 billion range is probably a good estimate. Obviously, we’re focused on that, and you know, we’ll work to minimize that as much as possible.

Pat Gelsinger, CEO, Intel Corporation: With that, I want to thank everyone for joining us today. We are on the journey of rebuilding Intel, and we have a lot of work ahead of us, but we are making solid progress in Q3. I look forward to seeing many of you throughout the quarter and providing you with another update in January.

Jonathan, Conference Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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