Key Highlights

  • INTC shares trading down 28.91% to $65.46 following the third-quarter report.
  • Third-quarter Revenue reached $16.5 billion, up 21% from a year earlier.
  • Fourth-quarter revenue is guided to $15.0 billion to $16.0 billion.
  • Non-GAAP gross Margin is expected to drop to 38.0% in the fourth quarter, from 44.1% in the third.
  • Data center and AI revenue climbed 78% to $7.3 billion, while the foundry unit lost $1.1 billion.

Fourth-Quarter Guidance Overshadows a Third-Quarter Beat

Intel (NASDAQ:INTC) shares are trading down 28.91% today after the company reported third-quarter results on October 29 and issued a fourth-quarter outlook that points to lower revenue and thinner margins. Based on today's price, the prior close was roughly $92.

Third-quarter revenue was $16.5 billion, up 21% from a year earlier. Non-GAAP Earnings were $0.52 per share, up from $0.23, while GAAP earnings were $0.60 per share, down 33%, with the GAAP figure including a $1.0 billion gain tied to escrowed shares under the U.S. government agreement.

Guide Calls for 38.0% Non-GAAP Gross Margin and $0.25 in Earnings

For the fourth quarter, Intel is guiding revenue of $15.0 billion to $16.0 billion, which sits below the third-quarter level. Non-GAAP gross margin is projected at 38.0% at the midpoint, compared with 44.1% in the third quarter and 40.0% a year ago.

Non-GAAP earnings are expected at $0.25 per share, and GAAP earnings at $0.10. The chief financial officer said the slowdown in PC Demand is expected to last at least through the first half of next year, and the company plans to keep investing in capacity and Working Capital to add supply.

Client computing, which sells chips for PCs, continues to be the weakest area of the Business at present. The release also pointed to industry-wide substrate and memory shortages as supply-chain risks, though it did not size their effect on Intel.

Data Center Surge Contrasts With Client Decline and Foundry Losses

The Data Center and AI group generated $7.3 billion of revenue, up 78%, with Operating Income of $3.0 billion. Management described it as the strongest data center growth in 15 years, and the chief executive said the immediate priority is expanding Xeon Supply to meet CPU demand.

Client computing revenue fell 5% to $8.1 billion, with operating income of $2.3 billion. Intel Foundry revenue rose 58% to $6.7 billion but posted an operating loss of $1.1 billion.

Intel ended the quarter with $21.8 billion in cash and cash equivalents plus $32.2 billion in short-term investments. Operating Cash Flow was $5.1 billion for the quarter, and adjusted free cash flow was $1.6 billion. Operating cash flow reached $13.2 billion over the first nine months. The company also completed a $23 billion public Equity offering.

Capacity Build-Out and Margin Recovery Set the Next Test for Intel

Beyond the numbers, Intel announced plans to acquire quantum software company Classiq, released the 14A process design kit in October and named Dean Jarnac executive vice president and chief sales officer, and detailed a multiyear Xeon collaboration with Oracle (NYSE:ORCL). Today's decline leaves the stock well below where it started the week, when it was trading in the high $80s. Investors will look to the fourth-quarter report for evidence that supply additions are lifting data center shipments and that gross margin is stabilizing after the guided decline.