Intel Just Delivered for Investors. Here Are 6 Key Things to Know.

Following a big rally over the past couple of months, Intel's (NASDAQ: INTC) third-quarter earnings report on Thursday was a high-stakes affair for the stock. The chip giant delivered, with revenue growing and earnings coming in far higher than expected. Intel's comeback is still in its early innings, but there were clear signs of progress in the third quarter. Here are six key things about Intel's report that investors need to know.

Image source: Intel.

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1. Revenue and profit beat expectations

Intel reported revenue of $13.7 billion in the third quarter, up 3% year over year and $560 million above the average analyst estimate. Adjusted earnings per share came in at $0.23, far ahead of the $0.01 expected by analysts and up from a loss of $0.46 in the prior-year period.

While Intel handily beat analyst expectations, the company noted that its transactions with the U.S. government during the third quarter are complicated and could lead to a revision of its third-quarter results down the road. Intel has engaged with the SEC to ensure that its accounting treatment is valid, but the U.S. government shutdown has halted this process.

2. The balance sheet is looking better

The investment from the U.S. government, which converted CHIPS Act grants that hadn't yet been delivered into an equity investment, along with investments from Softbank and Nvidia, have strengthened Intel's balance sheet. "One of our top priorities for 2025 was shoring up our balance sheet," said CFO David Zinsner during the earnings call.

Intel ended the third quarter with $30.9 billion in cash and short-term investments, up from $22.1 billion at the end of 2024. The company's total debt has also declined by about $3.4 billion to $46.6 billion. In addition to the investments in Intel, the company secured $3.3 billion with its sale of a majority stake in Altera. With the balance sheet in a stronger position, Intel has more breathing room as it continues to invest in its foundry business.

3. The PC business is making a comeback

The post-pandemic PC business has been rough following an initial surge in demand, but it now looks like the picture is improving. Intel expects the total addressable market (TAM) to approach 290 million units this year, up from 245 million reported by Gartner for 2024. That would represent the strongest growth since the pandemic boom year of 2021.

Intel's client computing group generated $8.5 billion in revenue during the third quarter, up 5% year over year. The company pointed to the Windows 11 refresh, which is being driven by Microsoft ending support for Windows 10, as well as a shift toward newer products like Lunar Lake and Arrow Lake, for the strong performance. While the competitiveness of Intel's PC portfolio is a mixed bag, an improving demand environment is aiding the company's largest segment.

4. Data center profits are rebounding

The data center and AI segment recorded $4.1 billion in revenue during the third quarter, down 1% year over year. However, profitability improved dramatically. Segment operating margin was 23.4% during the quarter, up from just 9.2% in the prior-year period and well above the company's results over the past year.

Intel is optimistic that demand for its data center CPUs will rise in the future. The company pointed to underinvestment in traditional data center infrastructure during the AI boom, as well as soaring demand for infrastructure that can handle AI inference workloads, as two main drivers of TAM expansion. The company's latest Granite Rapids chips are seeing strong demand, according to CEO Lip-Bu Tan.

5. Intel 18A will support three product generations, but yields need to improve

The Intel 18A family of manufacturing processes are critical not only for Intel's foundry business, but also for its product business. Panther Lake, the company's upcoming line of laptop CPUs, will use the Intel 18A process and start shipping before the end of the year. Nova Lake for desktop PCs will follow, as will the Clearwater Rapids and Diamond Rapids server CPUs. All these product lines are expected to use the Intel 18A process in some capacity. In fact, Intel 18A and its variants will support at least the next three generations of PC and server products, according to Tan.

One issue at the moment is the yield for the Intel 18A process. "Yields are, what I would say, 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," said Zinsner during the earnings call. The Intel 18A process involves a new transistor design and the first implementation of backside power delivery in the industry, both of which ramp up the complexity. Yields are improving, but profitability will hinge on bringing those yields up to industry-standard levels.

6. Supply constraints will hurt the PC business next quarter

Intel is facing a situation where there's strong demand for chips that use its older Intel 10 and Intel 7 processes, but not enough manufacturing capacity. "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," said Zinsner during the earnings call.

In the fourth quarter, Intel plans to prioritize the data center business. The company will focus on increasing the output of lucrative server CPUs at the expense of entry-level PC chips. The result will be a modest sales decline in the client computing segment and strong sequential growth in the data center segment. This situation will eventually go away as newer manufacturing processes ramp up and demand for older parts fade, but for now, it's stunting Intel's growth.

Is Intel stock a buy after earnings?

Intel is still in turnaround mode, and it will take time for the company's strategy to bear fruit. Market share gains in the PC business are a possibility in 2026 as the company launches Panther Lake and Nova Lake, and the prioritization of server CPUs in the near term will help boost the data center business.

The foundry business is operating on a longer timeline. The Intel 18A process still needs major customers, as does the next-generation Intel 14A process. For Intel Foundry to be sustainable and profitable, the company is going to need to win some major customer commitments.

While it's tough to value Intel stock right now, given that earnings are deeply depressed and the turnaround is ongoing, the company's position as the only U.S.-based advanced logic chip manufacturer shouldn't be ignored. With Intel stock down more than 40% from its multiyear high, betting on a turnaround looks like a reasonable idea for long-term investors.

Timothy Green has positions in Intel. The Motley Fool has positions in and recommends Intel, Microsoft, and Nvidia. The Motley Fool recommends Gartner and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.