Computer processor maker Intel (NASDAQ: INTC) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 2.8% year on year to $13.65 billion. On the other hand, next quarter’s revenue guidance of $13.3 billion was less impressive, coming in 0.8% below analysts’ estimates. Its non-GAAP profit of $0.08 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Intel’s third quarter reflected improving operational execution and renewed interest in its core processor business, with management attributing the positive results to strong AI-driven demand and effective cost controls. CEO Pat Gelsinger highlighted that the company “significantly improved our cash position and liquidity,” driven by strategic partnerships and government support. Management also underscored momentum in Intel’s x86 franchise, noting that AI is “accelerating demand for new compute architectures” while also fueling growth in traditional computing. The company’s collaboration with NVIDIA was cited as a key factor in building out its AI platform capabilities and strengthening its competitive positioning.

Looking forward, Intel’s outlook is shaped by ongoing capacity constraints, the ramp-up of new products like Panther Lake, and continued investment in advanced manufacturing nodes. CFO David Zinsner emphasized that the company is “prudently preparing for another year of strong demand in 2026,” particularly as AI adoption expands. However, management cautioned that supply shortages, especially for older node products, are expected to persist into early next year. Investments from NVIDIA and SoftBank, along with U.S. government funding, are expected to provide flexibility, but Zinsner noted that the company will remain “very disciplined around CapEx” as it aligns production with customer commitments.

Key Insights from Management’s Remarks

Management pointed to robust AI-related demand, enhanced product execution, and strategic partnerships as primary drivers of the quarter’s performance, while also highlighting operational efficiency improvements.

• AI-driven product momentum: Intel benefited from surging demand for AI-capable CPUs and server products, with management noting that AI is “driving near-term upside” and forming the foundation for long-term growth, especially as inference workloads rise across enterprise and cloud markets.

• Strengthened balance sheet: The company bolstered its liquidity through accelerated funding from the U.S. government, investments from NVIDIA and SoftBank, and monetizing stakes in Altera and Mobileye, which provided operational flexibility and supported continued strategic investments.

• Collaboration with NVIDIA: Intel’s partnership with NVIDIA was highlighted as a milestone, enabling the integration of Intel’s CPUs with NVIDIA’s NVLink for next-generation AI solutions and expanding the total addressable market beyond current product lines, according to leadership.

• Central Engineering Group formation: Management established a new Central Engineering Group to unify and streamline product development, aiming to reduce duplication, accelerate decision-making, and support the company’s ambitions in both general-purpose and custom silicon, including ASICs (application-specific integrated circuits).

• Foundry and packaging advances: Progress on the Intel 18A and 14A manufacturing nodes, as well as advanced packaging technologies like EMIB and EMIB-T, was cited as critical to future competitiveness and customer trust, with management reporting predictable yield improvements and active customer engagements.

Drivers of Future Performance

Intel’s guidance is shaped by persistent supply constraints, new product ramps, and a focus on disciplined capital allocation as AI-related demand continues to evolve.

• Ongoing supply constraints: Management expects tightness in both older and newer nodes to continue into early next year, particularly impacting server and client CPUs, with CFO David Zinsner anticipating that shortages may peak in the first quarter before gradually easing as inventories normalize and capacity catches up.

• AI and product transitions: The company is prioritizing server shipments and ramping up new products like Panther Lake and advanced Xeon processors. While these transitions may pressure margins initially due to higher start-up costs and lower early yields, leadership expects margins to improve as yields scale and the mix shifts to more efficient products.

• Disciplined capital spending: Despite a strengthened cash position from recent investments, management stressed a disciplined approach to capital expenditures, focusing on matching capacity additions to firm customer demand and maintaining operational flexibility as the foundry business expands.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will focus on (1) Intel’s ability to ramp production of new nodes like 18A and Panther Lake while resolving ongoing supply constraints, (2) execution and adoption of AI-enabled products and the effectiveness of the NVIDIA partnership, and (3) sustained progress in the Intel Foundry business, particularly as customer commitments solidify. Tracking margin improvement as advanced manufacturing scales will also be a key indicator of operational success.

Intel currently trades at $38.62, up from $38.16 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

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