Intel’s Data Center Growth Confronts a $1.85 Billion Foundry Loss

Intel generated $7.32 billion in third-quarter data center and AI revenue, up 78%, while Intel Foundry lost $1.85 billion. The shares traded at $56.28 after falling 50.25% over the past month.

By Tom Whitfield

Intel delivered its strongest data center growth in 15 years. That decline followed results combining record server growth with a soft fourth-quarter outlook, heavy spending plans and a deepening PC slump.

Intel’s 2018 business depended on x86 chips for PCs and servers. Since then, Advanced Micro Devices has taken market share, while Arm-based processors and AI accelerators have challenged the traditional CPU market.

Intel now operates through Intel Products and Intel Foundry, with the business rebuilt around data-center demand. The shares remain modestly above their level eight years ago; on an adjusted basis, they have gained just 33.47%.

What does constrained server supply mean for Intel?

Third-quarter data center and AI revenue rose 78% to $7.32 billion, while segment operating income climbed to $3.04 billion from $964 million. Total revenue rose 20.9% to $16.51 billion, and non-GAAP EPS of $0.52 beat the $0.40 estimate.

Intel management said demand “continues to meaningfully exceed available supply.” Management expects the industry to remain supply-constrained through 2027 and into 2028, and Intel estimates the server CPU market could grow from $40 billion to more than $200 billion over five years as agentic workloads favor energy-efficient CPUs.

NVIDIA completed a $5 billion equity investment and selected Intel as the host CPU for DGX Rubin NVL8. Oracle also signed a multiyear Xeon collaboration.

Analysts expect 2027 EPS of $1.7987, compared with $1.4866 this year; over 30 days, they made seven upward revisions and no downward revisions. Server demand gives Intel its strongest near-term support, but growth depends on adding capacity without surrendering pricing leverage.

Why can foundry spending overwhelm the data center gains?

Intel Foundry lost $1.85 billion in the quarter, while external foundry revenue reached only $411 million. A nonrecurring program provided much of that revenue.

CFO David Zinsner said he did not expect positive cash flow during the year. That warning accompanied plans for heavy spending.

Fourth-quarter guidance calls for revenue of $15.0 billion to $16.0 billion, non-GAAP EPS of $0.25 and gross margin of 38.0%. An incident at Intel’s Israel factory alone costs roughly $300 million in revenue, and management expects PC units to fall about 10% in 2027.

A $23 billion equity offering raised the expected diluted share count to 5.44 billion. At $56.28, Intel still traded at a forward P/E of 33. Intel Products must fund a capital-intensive foundry build whose external sales remain small and whose losses consume cash.

Which milestones can prove the reset?

Intel expects “a couple of customers ready to announce in the next two quarters” and plans to deliver the Intel 14A 1.0 process design kit early next year. Over the next two to three quarters, customer announcements, the 14A PDK and new Intel 3 capacity will test the spending plan.

Diamond Rapids ramps in 2027, while Intel expects Nova Lake design wins to reach twice those of Panther Lake at launch. Intel also needs the PC inventory correction to end before the earnings path becomes clearer.

External wins would validate spending that bears call a waste. The investment case would break if no named 14A customer appears by mid-2027, Intel 3 yields stall, or data center and AI growth slows as supply increases. The reset depends on turning process roadmaps and capacity plans into named orders.

How much confidence do analysts place in the recovery?

The $91.12 consensus target implies 61.9% upside from $56.28, though the target offers no guarantee and remains only one data point among many. The 49 covering analysts split as follows:

• Strong Buy: 1
• Buy: 11
• Hold: 36
• Sell: 1

Shares are up 52.52% year to date, compared with 7.83% for the S&P 500. Intel fell 50.25% over the past month while the index lost 5.39%, and its beta of 2.426 indicates that investors should expect large swings to continue.

Over five years, Intel gained 19.22%, against 56.94% for the S&P 500. Foundry losses narrowed by $236 million sequentially last quarter, while management guides the data center business to grow mid-teens sequentially even as client revenue falls more than 20%. The consensus target prices a possible recovery, not a completed turnaround.

Can Intel sustain the rebound after its reset?

The selloff priced in a weak fourth quarter and a cash-burning 2027. The bull case argues that the market gave too little credit to the data center franchise.

At $56.28, Intel trades near the level set by a 50.25% monthly decline even as analysts keep raising earnings estimates. The next test is whether Intel can turn constrained server supply and new Intel 3 capacity into durable growth. It must do so without letting foundry losses and the PC inventory correction absorb the cash.