Intel Q3 Revenue Rises 21% on Data Center and AI Growth

Intel (NASDAQ: INTC) reported a 20.9% year-over-year increase in third-quarter 2026 revenue, driven by record growth in its data center and AI business as demand from hyperscale, enterprise and newer cloud customers strengthened. Profitability also improved, while lower wafer costs helped narrow losses at Intel Foundry.

Revenue reached $16.5 billion, $200 million above the midpoint of Intel’s July outlook. Non-GAAP gross margin expanded 4.1 percentage points from a year earlier to 44.1%, exceeding the company’s prior outlook by 2.1 points. Non-GAAP diluted earnings were $0.52 per share, up from $0.23 and $0.14 above the July outlook.

On a GAAP basis, gross margin rose 4.8 percentage points to 43.0%. GAAP diluted earnings fell to $0.60 per share from $0.90 a year earlier. GAAP operating income was $2.5 billion, compared with $700 million in the prior-year quarter, while non-GAAP operating income increased to $3.2 billion from $1.5 billion.

Intel generated $5.1 billion of operating cash flow during the quarter. After $4.2 billion of gross capital expenditures, $800 million of net partner contributions and $100 million of finance lease payments, adjusted free cash flow was $1.6 billion.

Data center growth leads the quarter

Data Center and AI, or DCAI, generated $7.3 billion of segment revenue, up from $4.1 billion in the third quarter of 2025. Segment operating income rose to $3.0 billion from $1.0 billion, lifting operating margin to 41.5% from 23.4%.

Intel said demand was strong across hyperscale, enterprise and neo-cloud customers. Purpose Built Silicon revenue more than doubled year over year, while interest in the company’s product roadmap increased as customers deployed agentic AI workloads. Management said disciplined execution allowed server output to exceed its expectations and that Intel is investing to secure additional supply.

PC business faces memory constraints

Client Computing Products Group revenue was $8.5 billion, compared with $8.2 billion a year earlier. Segment operating income was $2.3 billion, down from $2.7 billion, and operating margin declined to 28.2% from 31.6%.

The company said industry-wide memory shortages were affecting the PC total addressable market. At the same time, Intel reported strong demand for its 18A-based Wildcat Lake products and continued year-over-year growth in AI PCs. Management maintained a positive long-term view of the PC business, citing opportunities in agentic systems, edge computing and physical AI.

Foundry losses narrow as yields improve

Intel Foundry recorded $5.8 billion in segment revenue, up from $4.5 billion in the year-earlier period. Its operating loss narrowed to $1.9 billion from $2.3 billion, while operating margin improved to negative 27.7% from negative 54.8%.

Intel attributed lower wafer costs to better yields and shorter cycle times. The company also said Intel 3 and Intel 18A yield execution was improving, with 18A-P scheduled for the fourth quarter. Intel released the 0.9 process design kit for its next-generation 14A process as planned and highlighted progress in EMIB-T yield, reliability and supply. Manufacturing expansion is continuing across its sites, including Ohio.

Fourth-quarter outlook

For the fourth quarter of 2026, Intel expects revenue of $15.0 billion to $16.0 billion. At the $15.5 billion midpoint, that would represent a $1.8 billion year-over-year increase.

The company projects a non-GAAP gross margin of 38.0%, up 0.1 percentage point from the fourth quarter of 2025, and non-GAAP diluted earnings of $0.25 per share, up $0.10. Its corresponding GAAP outlook calls for gross margin of approximately 37.1% and diluted earnings of $0.10 per share.

Intel’s outlook remains subject to risks including intense competition, rapid technological change and the cost and complexity of developing new products and manufacturing processes. The company also identified uncertainty around securing external customers for advanced nodes such as Intel 14A, semiconductor supply constraints, changing demand and margins, geopolitical and trade tensions, tariffs and export controls, and the availability of capital and government incentives.