The short version
Intel (INTC) reported on Thursday and beat on earnings. Adjusted earnings of $0.52 a share against about $0.41 expected, on revenue of $16.5 billion, up 21%.
The data centre business had its best quarter in 15 years. Revenue of $7.3 billion, up roughly 80% year on year, with operating profit of $3 billion.
But here is the number that defines Intel's strategy. Intel Foundry booked $6.7 billion of revenue last quarter. Only $411 million of that came from external customers.
The rest was Intel selling to Intel. And the foundry still lost $1.9 billion.
Even that $411 million came with a caveat: the company said the increase was primarily due to a non-recurring customer programme.
And the fourth quarter is guided lower. Revenue of $15.0-16.0 billion, below this quarter, with adjusted earnings of $0.25 against the $0.52 just delivered.
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What Intel reported
- 💵 Revenue: $16.5 billion, up 21%, marginally below the roughly $16.54 billion expected.
- 📊 Adjusted earnings: $0.52 a share, against about $0.41 expected and $0.38 guided. Reported earnings were $0.60.
- 📐 Adjusted gross margin: 44.1%, up around 200 basis points sequentially and ahead of guidance.
- 🏦 Operating cash flow: $5.91 billion.
The segments tell two different stories:
- 🖥️ Data Centre and AI: $7.3 billion, up 17% sequentially and roughly 80% year on year, the strongest growth in 15 years. Operating profit of $3 billion, a 42% margin.
- 💻 Client Computing: $8.1 billion, down 9% sequentially and below expectations, though AI PC revenue grew 35% year on year. Operating profit of $2.3 billion, a 28% margin.
The manufacturing progress is real. Intel 18A costs have fallen roughly 40% since the first quarter, with Intel 3 down about 15%. Chips built on 18A have gone from under 5% of client processor revenue to nearly a third. One product, Wildcat Lake, grew units about 70% sequentially and is sold out.
Why the foundry number matters so much
Intel's whole turnaround rests on becoming a manufacturer for other companies, the way TSMC does. That is what "foundry" means.
So the split inside that $6.7 billion is the number to watch:
- 🏭 About $6.3 billion was internal, Intel's manufacturing arm selling wafers to Intel's own product divisions. Real work, but money moving between pockets of the same company.
- 🌍 $411 million was external, from actual outside customers. That is roughly 6% of foundry revenue.
- 📉 The segment lost $1.9 billion, though that was an improvement of $236 million on the previous quarter.
The company is candid about it. Intel's own filing notes that substantially all of its foundry business currently supports internal manufacturing, and management said on the call that there is considerable work ahead to deliver a sustainably profitable foundry business.
Why this is the thing to track: internal revenue proves the factories work. External revenue proves other companies trust them enough to build their own chips there. Only the second one makes Intel a competitor to TSMC.
One quarter, two earnings figures, opposite directions
Intel's reported earnings fell 33%. Its adjusted earnings rose 126%. Same quarter.
- 📉 Reported: $0.60 a share, down from $0.90 a year earlier.
- 📈 Adjusted: $0.52 a share, up from $0.23 a year earlier.
Both figures are in the company's own release, side by side. The reported figure includes items the adjusted figure strips out, and last year's reported number was flattered by gains that did not repeat.
This is the third time this week we have seen the same thing:
- 🔵 Alphabet's earnings per share fell while operating income rose 30%, because of an $8.2 billion unrealised loss on its SpaceX stake.
- 🟠 Amazon's net income dipped while operating income rose 61%, because last year included a $9.5 billion gain on its Anthropic stake.
- ⚪ Intel's reported earnings fell while adjusted earnings more than doubled.
The habit, stated once more because it keeps earning its place: when a headline says profits rose or fell, find out which profit figure it means and what sits inside it. Three enormous companies in one week produced headlines that pointed the wrong way.
The quarter ahead looks softer
Intel guided to fourth-quarter revenue of $15.0-16.0 billion, below the $16.5 billion just reported.
Adjusted earnings are guided at $0.25, roughly half the $0.52 just delivered. Reported earnings are guided at $0.10.
The company's explanation points to near-term headwinds across the PC industry, while maintaining that demand for its processors remains robust.
Worth noting what that guidance does not assume: a sudden arrival of large external foundry customers. The turnaround is being built node by node, and the market is being asked to wait for it.
What could go wrong
- 🏭 External foundry revenue is tiny and partly one-off. $411 million of $6.7 billion, with the increase attributed to a non-recurring programme. Until outside customers commit at scale, the foundry is an expensive internal supplier.
- 💸 It is still losing $1.9 billion a quarter, and Intel is investing further to get its next node ready for risk production.
- 📉 Guidance points down. Fourth-quarter revenue below this quarter and adjusted earnings roughly halving.
- 💻 The client business is shrinking. Down 9% sequentially and below expectations, which matters because it is the larger of the two product segments.
- 🏁 The competition is formidable. TSMC manufactures for most of the industry and has decades of customer relationships. Winning external foundry business means persuading companies to trust a competitor with their designs.
- ⏳ This is a multi-year turnaround being judged quarter by quarter, which is an uncomfortable combination for a share price.
INTC is an example to research, not a recommendation.
What should investors take from this?
Learn to spot revenue a company pays itself.
Intersegment or internal revenue is real activity, but it does not bring new money into the business. When a company's strategy depends on winning outside customers, internal revenue can make the transition look further along than it is.
Three habits:
- 🔍 Look for the external figure in any segment that sells internally. Intel publishes both, which is to its credit. Not every company does.
- ⚠️ Treat "non-recurring" as a warning label. Intel said the external increase was primarily a one-off programme, which means next quarter starts from a lower base.
- 📊 Read both earnings figures. Reported down 33%, adjusted up 126%, same quarter. It is the same discipline that explained Alphabet's three profit numbers and Amazon's prior-year Anthropic gain.
And if the chip theme interests you more than a single turnaround, our semiconductor explainer sets out who does what across designers, manufacturers and equipment makers.
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FAQs
What did Intel report for Q3 2026? Revenue of $16.5 billion, up 21%, marginally below the roughly $16.54 billion expected. Adjusted earnings of $0.52 a share against about $0.41 expected, with reported earnings of $0.60. Adjusted gross margin was 44.1% and operating cash flow was $5.91 billion.
How much does Intel Foundry earn from outside customers? External foundry revenue was $411 million in the quarter, out of $6.7 billion of total foundry revenue. The remainder is internal, with Intel's manufacturing arm supplying Intel's own product divisions. The segment recorded a $1.9 billion operating loss.
Why did Intel's reported and adjusted earnings move in opposite directions? Reported earnings fell 33% to $0.60 while adjusted earnings rose 126% to $0.52. The two measures include different items, and the prior-year reported figure included gains that did not repeat.
What is Intel's guidance for the fourth quarter? Revenue of $15.0-16.0 billion, below the third quarter, with reported earnings of $0.10 and adjusted earnings of $0.25 a share. The company cited near-term headwinds in the PC industry.
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