Intel Just Shocked Wall Street: AI Boom + Government Money = Stock Rockets

Intel (INTC) delivered a comeback quarter that reignited investor confidence and sent shares up nearly 7% as the company outperformed expectations on both the top and bottom line, underscoring the early success of its restructuring under CEO Lip-Bu Tan .

Intel reported Q3 adjusted EPS of $0.23 versus estimates of $0.01 and revenue of $13.65 billion versus $13.14 billion expected, marking its fourth straight quarter of beating guidance and its first GAAP profit after six consecutive quarterly losses. Gross margin improved to 40%, signaling progress in cost controls and product mix. The company posted $900 million in free cash flow and $2.5 billion in operating cash flow — a notable rebound from recent quarters.

The results were driven by a surprisingly strong rebound in PC demand and AI-driven server upgrades. Intel’s Client Computing Group (CCG) revenue rose to $8.5 billion, benefiting from the Windows 11 refresh cycle and rising adoption of AI-enabled PCs. Data Center and AI (DCAI) segment revenue came in at $4.1 billion, slightly lower year-over-year but ahead of internal forecasts, as cloud and enterprise customers refreshed CPU deployments faster than anticipated. CFO David Zinsner noted that demand is “outpacing supply,” a situation that Intel expects to persist into 2026 due to capacity limits on its older Intel 10 and Intel 7 processes.

The company’s foundry division (IFS) remains a work in progress but is beginning to take shape strategically. Foundry revenue fell 2% to $4.2 billion, all internal, and it still reported a $2.3 billion operating loss. However, Intel said its 18A process node remains on track to ramp production of Panther Lake chips by year-end, even though yields are below target. CEO Tan acknowledged the learning curve but emphasized that Intel has started production of its most advanced chips in Arizona and is laying the groundwork for external foundry customers as yields and reliability improve. The company’s reorganization — including a new Central Engineering Group — is designed to accelerate R&D efficiency and foundational IP development.

Much of Intel’s newfound financial strength stems from strategic investments and government partnerships that have dramatically improved liquidity. The U.S. government’s $11.1 billion equity stake and $5.7 billion cash infusion during the quarter, combined with investments from Nvidia ($5 billion) and SoftBank ($2 billion), left Intel with $30.9 billion in cash and short-term investments. Once Nvidia’s payment clears, the company expects to sit on roughly $35 billion in total cash. Tan said these partnerships highlight Intel’s “strategic role as the only U.S. semiconductor company with leading-edge logic R&D and manufacturing.” Zinsner added that these deals give Intel “flexibility to de-leverage and invest strategically in next-generation nodes.”

The AI theme dominated the call, as Intel positioned itself as a key complement to Nvidia’s dominant GPU ecosystem rather than a direct rival. The companies are collaborating on hybrid systems combining Intel’s CPUs and Nvidia’s GPUs to accelerate AI adoption across enterprise and data-center markets. Intel said AI is “clearly accelerating demand for new compute architectures,” and it expects the AI PC segment to drive the fastest TAM growth since 2021. The firm projects client PC unit consumption to approach 290 million units in 2025, up significantly year-over-year.

On guidance, Intel expects Q4 revenue between $12.8 billion and $13.8 billion (near the Street’s $13.37 billion estimate) and adjusted EPS of $0.08, matching consensus. Gross margin is expected to dip to 36.5% due to the launch of new Core Ultra 3 products and the deconsolidation of Altera. The company warned that foundry capacity constraints and sub-optimal 18A yields will pressure margins into 2026 but should improve as production mix shifts to Intel 3 and Intel 4 nodes. Zinsner said the priority is to “de-leverage and deploy CapEx with discipline,” emphasizing that Intel will not add capacity without firm customer commitments.

Analysts welcomed the results as evidence of stabilization. Benchmark raised its price target to $50, calling it Intel’s “first real turning point in years.” KeyBanc noted that “results were driven by stronger CCG and DCAI segments despite foundry constraints,” while BofA remained cautious on margins, flagging Intel’s foundry scale as “still sub-critical.” Even Rebellion Research, which maintains a Sell rating, raised its target from $14 to $25 on balance-sheet improvement and growing AI demand.

The takeaway: Intel’s recovery is gaining momentum. Its AI partnerships, government backing, and foundry ambitions have given the company a financial and strategic lifeline. Challenges remain — yields, margins, and execution — but after four quarters of beats and a return to profitability, the market is starting to believe Intel may finally be turning the corner.