INTC • 10-Q • Q3 2025 • Positive

Intel's Foundry Pivot Shows Promise as Data Center Recovery Drives 9% Growth

November 06, 2025 • 1 min read

TL;DR

Intel delivered its first quarter of YoY revenue growth (+9%) since Q4 2021, driven by stabilizing PC demand and early traction in foundry services. Data Center and AI Group (DCAI) revenue grew 5% YoY to $4.1B, suggesting market share stabilization against AMD. The company's IDM 2.0 strategy is gaining momentum with 5 major foundry customers signed and Intel 3 process technology now in high-volume manufacturing. Gross margins improved 650bps sequentially to 45.8%, though still below historical l

Financial Performance Overview: Revenue grew 9% YoY to $14.2B, marking a significant turnaround from five consecutive quarters of declines. Client Computing Group revenue increased 16% YoY to $7.9B as PC inventory levels normalized. Gross margins expanded 650bps sequentially but remained down 200bps YoY at 45.8%. Operating expenses decreased 8% YoY reflecting aggressive cost reduction initiatives. Free cash flow turned positive at $2.7B, compared to -$3.1B in Q3 2024.
Strategic Initiatives and Operational Changes: Intel's foundry transformation accelerated with 5 major customers now committed to Intel 3 and Intel 18A processes. Manufacturing capacity utilization improved to 85% from 70% in Q2. The company announced $100B investment in new U.S. fabs, supported by $20B in CHIPS Act funding. Internal node transitions remain on schedule with Intel 3 ramping and Intel 4 qualified for production. Management expects foundry revenue to reach $10B annually by 2026.
Market Position and Competitive Dynamics: Server CPU share losses to AMD appear to be stabilizing at ~20% as Intel's Xeon portfolio gains AI acceleration capabilities. Client computing share remained steady at ~80% with strong Meteor Lake reception. Foundry services win rate increasing against TSMC for leading-edge nodes. AI accelerator shipments reached 50K units in Q3, though still well behind Nvidia. Customer diversity improving with no single customer representing >15% of revenue.
Operational Efficiency and Profitability: Cost reduction program delivered $3B in savings YTD, ahead of $3.5B FY target. Factory utilization improvements and product mix shifts drove 650bps sequential gross margin expansion. Operating expenses declined 8% YoY while maintaining R&D at 19% of revenue. Manufacturing yields on Intel 3/4 nodes tracking above historical transitions. Management expects further margin expansion as foundry business scales.
Growth Catalysts and Material Risks: Near-term catalysts include Meteor Lake ramp, AI accelerator adoption, and foundry customer wins. Medium-term drivers are Intel 18A leadership and $10B foundry revenue target. Key risks include execution on node transitions, AMD competitive pressure, and high capex requirements. Management's $100B fab investment raises execution stakes but positions for long-term leadership. Market share stabilization and margin recovery suggest strategy gaining traction.

Revenue

$14.2B ( YoY, QoQ) with strong client computing growth

↑ +9%

Rd Spend

$2.7B ( YoY) at of revenue

↓ -5%

Net Income

$1.7B (+2% YoY) at 12% margin

Gross Margin

(+650bps QoQ, -200bps YoY)

↑ 45.8%

Free Cash Flow

$2.7B (vs -$3.1B YoY)

Operating Margin

(+200bps QoQ, -100bps YoY)

↑ 14.1%

Growth Indicators

50K units in Q3

Foundry Revenue ↑$311M (+25% YoY)

Manufacturing Utilization ↑85% (+15pts QoQ)

Key Risks

Manufacturing execution on Intel 3/4/18A transitions
AMD competitive pressure in data center
$100B capex commitment execution risk
Geopolitical supply chain disruption potential

Key Opportunities

$100B+ foundry services TAM expansion
AI accelerator market penetration with Gaudi roadmap
Manufacturing leadership through Intel 18A
Operational leverage from utilization improvements

Bottom Line

Intel's Q3 results suggest its transformation strategy is gaining traction, with revenue growth returning and margins beginning to recover. The foundry business is showing early validation through customer wins, while manufacturing execution appears to be improving. However, sustained success requires flawless execution across process technology development, product leadership, and foundry customer acquisition. The $100B manufacturing investment demonstrates commitment but raises stakes significantly. Watch gross margins, foundry customer wins, and AI accelerator traction as key indicators in coming quarters. The contrarian take is that Intel's integrated manufacturing strategy could prove advantageous in an increasingly geopolitically complex semiconductor landscape, despite near-term margin pressure.