Intel: Stopping the Losses and Recovering! Can the 'American SMIC' Poach TSMC Talent?

Intel released its Q3 2025 financial report (ending September 2025) after the U.S. stock market closed on the morning of October 24, 2025, Beijing time. Key points are as follows:

1. Core Data: $Intel(INTC.US) achieved revenue of $13.65 billion this quarter, a slight year-on-year increase of 2.8%, slightly exceeding the upper limit of the company's guidance, mainly driven by the recovery of the client business. The gross margin for this quarter rebounded significantly to 38.2%, much better than the guidance expectation (34.1%). The "flash crash" in gross margin last quarter was mainly due to non-operating expenses. Even after excluding this impact, last quarter's gross margin was about 35%, and this quarter still shows a sequential improvement.

2. Progress in Layoffs and Cost Control: The company's operating expenses this quarter reached $4.54 billion, continuing the pace of layoffs and cost reduction. The company's R&D expenses continued to decline to $3.23 billion, with the R&D expense ratio reduced to 23.7%.

The total number of employees this quarter was significantly reduced to 88,400, in line with the company's established target, with plans to control the total number of employees to around 75,000 by the end of the year, which means approximately 13,400 more layoffs.

3. Business Situation: After Intel adjusted its business disclosure standards, the company's main revenue still comes from client business and data center and AI, with the two accounting for over 90% of revenue.

a) Client Business: This quarter's revenue was $8.54 billion, a year-on-year increase of 4.6%, mainly driven by the recovery of the PC industry. Considering the global PC shipments increased by 10% year-on-year this quarter, Intel is still losing market share in the PC market this quarter.

b) Data Center and AI: This quarter's revenue was $4.12 billion, a year-on-year decrease of 0.6%. The company's current business still mainly revolves around data center CPUs, with a flat performance this quarter. This quarter, the company established a partnership with NVIDIA in the data center field to integrate x86 CPUs with Nvlink interfaces, hoping to gain opportunities to enter the main AI battlefield.

c) Intel Foundry Business: This quarter's revenue was $4.24 billion, a year-on-year decline of 2.4%. The foundry revenue this quarter still mainly came from Intel 7 and Intel 10, which are essentially Intel's own products.

The current 18A process has started mass production, prioritizing the company's own Panther Lake products, which is a positive signal. Although the 18A process still lags behind TSMC in terms of transistor density, the mass production of the new process can still convey confidence in catching up with TSMC to the market.

As a U.S.-based semiconductor manufacturing company, if Intel's process capabilities can approach TSMC, there is still an opportunity to gain more orders in the future, and the foundry business will become the company's main breakthrough point.

4. Next Quarter Guidance: Intel expects Q4 2025 revenue to be $12.8-13.8 billion, with market expectations at $13.4 billion; Q4 2025 gross margin is expected to be 34.5%, slightly below market expectations (35.3%).

Dolphin Research's Overall View: Performance Stops Loss and Recovers, Looking Forward to Foundry's "Bloom" Again

Intel's financial report this quarter is good, with revenue and gross margin exceeding guidance expectations. The gross margin is the biggest highlight, reaching 38.2% this quarter, driving the company's operating profit to "stop loss and turn profit" ahead of schedule.

Even though the company's gross margin has improved significantly, the company has not stopped the "layoffs and cost reduction" steps. The number of employees this quarter was reduced to 88,400, continuing to approach the year-end target of 75,000, and the company's operating expenses are also expected to decrease further.

For next quarter's guidance: The company expects next quarter's revenue to be $12.8-13.8 billion, similar to this quarter; next quarter's gross margin guidance is 34.5%, mainly affected by the ramp-up of Panther Lake and the divestiture of the Altera business.

Intel was particularly "busy" this quarter, securing investments from the U.S. government and SoftBank, and establishing a partnership with NVIDIA. Intel's PB once fell below 1x, and the support from multiple parties has boosted market confidence in Intel's business recovery, allowing the company to escape the "bankruptcy-style" valuation situation.

Previously, Intel faced four major "dilemmas": continuous operating losses, basically exiting the main AI battlefield, gradually losing traditional advantages in the PC field, and no breakthrough in foundry, which gradually eroded investor confidence and raised concerns about the company's "bankruptcy" outcome.

After a series of operations this quarter, "seat belts" were put on the above "concerns":

a) Investment from the U.S. Government and SoftBank: "Losses" can be tolerated

After the U.S. government invested, it also brought in SoftBank and NVIDIA, and the U.S. government has now become Intel's largest single shareholder. In fact, Intel has become a "U.S. state-owned enterprise," mainly because Intel aligns with the U.S.'s current "manufacturing return" policy.

Although Intel's operating side is unlikely to see significant improvement in the short term, becoming a "U.S. state-owned enterprise" allows the market to tolerate its "losses" and believe that the U.S. government and related companies will "inject blood" into it.

b) Cooperation with NVIDIA: Entering the Main AI Arena, Defending PC Share

Intel's "sluggish" operating side is mainly because the company is in a "hopeless, being robbed" situation: On one hand, the company is entrenched in the traditional data center CPU field and has been unable to open up the AI chip situation; on the other hand, the company's original advantage field (PC CPU market) continues to be impacted by AMD, especially in the desktop CPU market, where AMD's market share has surpassed Intel's.

This cooperation with NVIDIA not only brought in a $5 billion investment, but more importantly, the two companies will cooperate in the data center and PC fields: ① In the data center field, Intel will customize x86 data center-specific CPUs for NVIDIA, integrating NVlink interfaces, which NVIDIA will integrate into the AI infrastructure platform and launch to the market; ② In the PC field, Intel will produce x86 system-on-chip (SOC) integrated with NVIDIA RTX GPU chips.

For Intel, this cooperation is both "defense" and "hope":

① "Defense": Combining NVIDIA GPUs to launch SOC products for AI PCs. This can both make up for the company's shortcomings and enhance its competitiveness in the PC market, resisting AMD's impact;

② "Hope": Although the company has not yet received NVIDIA's foundry orders, integrating the company's x86 data center CPUs with Nvlink can also give Intel the opportunity to enter the main AI battlefield;

c) Progress in Foundry:

Current AI chips are mostly dependent on TSMC, with Samsung and Intel being the most hopeful chasers. Intel's progress in 18A and 14A is also a market focus.

At the Intel Technology Tour 2025 on October 9, the company announced that Intel 18A has completed development, production certification, and early production in Oregon, and is moving towards mass production at the Arizona fab, with a target mass production time by the end of this year.

Although Intel 18A's transistor density is roughly equivalent to TSMC's 3nm level, this also reflects Intel's progress in advanced processes. According to the company's plan, 18A will first be used in Panther Lake products, and then external foundry will be considered. It is worth noting the specific performance and yield of 18A in the future.

Combining the company's foundry roadmap, the company plans to launch 18A-P and 14A processes in 2026 and 2027, respectively. If this plan can be implemented on schedule, "U.S.-based" Intel will have the opportunity to "poach" TSMC, thereby gaining external orders and greater growth opportunities.

Recently, there have been market rumors that "Microsoft has placed an order for its Maia 2 with Intel Foundry, planning to use the advanced 18A process node for production," further reflecting market confidence in Intel's foundry business.

Regarding Intel's investment value, since the company's current performance barely achieves "stop loss and turn profit," it is difficult to evaluate using PE. From a PB perspective, the company's valuation once fell below 1x PB. With investments from the U.S. government, NVIDIA, and others, Intel has avoided a "bankruptcy-style" valuation. The current PB has risen to between 1.5-2x, also reflecting the market's expectation of the company's "stabilization and recovery."

From the perspective of the company's performance, the previous losses were mainly due to low gross margins. As the business stabilizes, the company's gross margin is expected to rise to 40% and above. Dolphin Research expects the company to achieve a full-year turnaround in 2026 (assuming revenue +6%, gross margin 40.5%, tax rate 10%), and if all goes well, the company's profits will be significantly released in 2027.

Combining the company's current market value ($167 billion), it roughly corresponds to a PE of about 29x for the 2027 post-tax operating profit (assuming a revenue compound growth rate of 5.6%, gross margin 44.5%, tax rate 10%). The significant growth on the profit side is mainly due to the boost from the gross margin improvement.

Overall, the support from the U.S. government, SoftBank, and NVIDIA has brought confidence to the market, and the company can avoid falling back into a "bankruptcy-style" valuation. In addition, the entry prices of the three investors also draw a bottom range for Intel's stock price ($20-23 per share).

From a PE perspective, the company's current market value already includes the expectation of a recovery in the company's operations, requiring the release of profits in 2026/2027 to digest. If the company's foundry business performs better than expected (good yield performance or early mass production of A14), Intel has the opportunity to receive overflow orders for AI chips, driving the company's performance and stock price to continue to rise. For more company progress, please follow Dolphin Research's subsequent management communication minutes and other content.

The following is Dolphin Research's specific analysis of Intel:

I. Core Data: Gross Margin Rebounds, Operating Side "Stops Loss and Turns Profit"

1.1 Revenue Side: Intel achieved revenue of $13.65 billion in Q3 2025, a year-on-year increase of 2.8%, exceeding the company's guidance range ($12.6-13.6 billion).

The data center and AI business remains flat, with the company's growth this quarter mainly driven by the client business. As 18A begins mass production, more market attention will be focused on the progress of the foundry business.

1.2 Gross Profit and Gross Margin: Intel achieved a gross profit of $5.22 billion in Q3 2025, with significant year-on-year and sequential growth. With a slight increase in revenue, this is mainly driven by the improvement in gross margin.

Specifically, the gross margin for this quarter was 38.2%, significantly better than market expectations (35.6%).

Last quarter, the company was affected by approximately $1 billion in non-operating expenses, excluding which, last quarter's gross margin was about 35%. Even so, this quarter's gross margin still shows a significant sequential improvement, mainly benefiting from the recovery of downstream demand such as the PC market.

1.3 Operating Expenses: Intel's operating expenses in Q3 2025 were $4.54 billion, a year-on-year decrease of 59%. After the new CEO set a goal of "reducing cost expenditures," operating expenses have also become a focus.

Specifically: ① R&D expenses: $3.23 billion, a year-on-year decrease of 20%, ; ② Sales and management expenses: $1.13 billion, a year-on-year decrease of 18.4%; ③ Restructuring and other expenses: $175 million, a significant year-on-year decrease, due to approximately $5 billion in restructuring and goodwill impairment-related expenses in the same period last year.

The current number of employees has decreased to 88,400, a sequential decrease of 13,000. Since the company previously set a year-end target of 75,000 employees, it is expected that the company will lay off about 13,000 more employees in the fourth quarter.

1.4 Net Profit: Intel's net profit in Q3 2025 was $4.06 billion, a significant increase, mainly due to the improvement in gross margin and non-operating gains and losses.

From an operational perspective, the company's operating profit this quarter was about $683 million, achieving "stop loss and turn profit," which better reflects the company's true operating condition. The company's operating side rebounded this quarter, mainly benefiting from the reduction in expenses, the recovery of the PC market, and the improvement in gross margin.

II. Detailed Data Situation: PC Market Takes Advantage, Foundry is the Biggest Expectation

After changing the CEO, Intel adjusted its business disclosure standards again last quarter. Intel divided its own product business into client business and data center and AI, with the rest being wafer foundry and all other businesses.

Network and edge business will no longer be disclosed separately starting this quarter, and Altera, Mobileye, IMS, and other businesses are all included in all other businesses. After the divestiture of Altera and Mobileye, other businesses mainly include IMS business, startup projects, and other businesses.

After the company's business adjustment, it can be seen that client business and data center business are the company's largest sources of revenue. Considering the company's wafer foundry and internal offset situation, Intel is still almost self-sufficient, with very little external foundry business revenue.

2.1 Client Business

Intel's client revenue in Q3 2025 was $8.54 billion, a year-on-year increase of 4.6%. This quarter's growth was mainly due to the recovery of the PC market and the increase in downstream customer stocking demand.

Since the company adjusted its business standards in the first quarter of this year, including part of the original network and edge revenue into the client business, the data is not quite consistent with past financial reports.

According to IDC industry data, global shipments this quarter were 75.9 million units, a year-on-year increase of 10%, and the overall industry continues to recover. In comparison, the company's client revenue only increased by 4.6%, indicating that Intel is still losing market share in the PC market.

Recently, the company established a partnership with NVIDIA, also hoping to resist AMD's continued erosion. Due to Intel's lack of progress in the independent graphics card field, its competitiveness in the market has declined. By combining NVIDIA GPUs and launching SOC products for the AI PC market, the company can enhance its competitiveness in the PC market to a certain extent, thereby entering the high-end PC market.

2.2 Data Center and AI

Intel's data center and AI revenue in Q3 2025 was $4.12 billion, a year-on-year decrease of 0.6%. The sequential growth was driven by the demand for AI servers. Overall, the company's data center and AI revenue remains around $4 billion, relatively flat.

The company's current data center and AI business still mainly revolves around CPU products, and since the company has been unable to break through in CPUs, it is difficult for the company to enter the main AI battlefield.

Through recent cooperation with NVIDIA, Intel's x86 data center CPU products are connected to Nvlink, providing more options for downstream cloud services, and Intel also has the opportunity to "sip some soup" in the main AI battlefield.

This also indicates that Intel's new CEO has adjusted the company's strategy, focusing more on improving manufacturing capabilities. The company will relatively focus more on the CPU field in the data center market and breakthroughs in foundry process capabilities.

If the company's foundry business achieves a breakthrough, even if it cannot launch its own GPU products, it can still enter the core track of the data center by obtaining orders from GPU, ASIC, and other manufacturers.

2.3 Intel's Foundry Business

Intel's wafer foundry business revenue in Q3 2025 was $4.24 billion, a year-on-year decrease of 2.4%. Combining the company's internal offset total of $4.23 billion this quarter, it can be seen that the company's current wafer foundry is basically for internal services, with very little external foundry revenue.

The company's new CEO has more clearly proposed to focus on the development of the foundry business, so Intel will pay more attention to the foundry business, which is also the company's "rebirth" opportunity.

Intel's U.S.-based manufacturing capacity is inherently the company's "lifeblood" advantage, which is also the main reason why the U.S. government recently pulled in SoftBank and NVIDIA to "inject blood" into the company. Now, the company has become a "U.S. state-owned enterprise," which largely avoids the company from falling into a "bankruptcy-style" situation again.

The company's foundry business this quarter is still mainly focused on Intel 7 and Intel 10, with the market's most concerned 18A already starting mass production. Although the company's 18A products still have a gap with TSMC in terms of transistor density, this also reflects the company's efforts to catch up in the field of advanced processes.

Currently, 18A products are still used for the company's own Panther Lake products. If they show good performance and yield in the future, the company also has the opportunity to obtain external customer orders.

After receiving multiple investments, the market is no longer worried about the possibility of the company's "bankruptcy." The foundry business has become Intel's current biggest focus. If the company's 18A or 14A makes good progress and external customers, it is expected to bring greater confidence to the company.

Dolphin Research's Retrospective on Intel Articles:

September 19, 2025, Quick Interpretation "Intel: Embracing NVIDIA's "Big Thigh," Who is the Real Winner?"

July 25, 2025, Conference Call "Intel (Minutes): 18A Production Peak Will Be Around 2030"

July 25, 2025, Financial Report Commentary "Intel: After Massive Layoffs, Is the American "SMIC" a Good End?"

April 25, 2025, Conference Call "Intel (Minutes): Full-Year Capital Expenditure Reduced from $20 Billion to $18 Billion"

April 25, 2025, Financial Report Commentary "Intel: Selling Assets with One Hand, Laying Off Employees with the Other, Can the Change of Leadership Save It?"

January 31, 2025, Intel Conference Call "Intel (Minutes): Achieving Break-Even in Foundry Services by the End of 2027"

January 31, 2025, Intel Financial Report Commentary "Intel: Layoffs and Cost Reduction Show Results, But Growth Remains a "Big Problem"?"

November 1, 2024, Intel Financial Report Commentary "Intel: Can It Stand Up Again After Shedding the "Big Burden"?"

August 2, 2024, Intel Financial Report Commentary "Total Collapse, Intel's "Dream of a Yellow Millet""

April 26, 2024, Intel Financial Report Commentary "Intel: The Marginalized AI Bystander"

January 26, 2024, Intel Conference Call "Intel 3, Is It an Opportunity? (Intel 23Q4 Conference Call)"

January 26, 2024, Intel Financial Report Commentary "Intel: The Processor Throne No Longer, AI Battle in Disarray"

January 17, 2024, Intel In-Depth "Intel: AI PC, Is It the "Toothpaste Factory's" Lifeline?"

The risk disclosure and statement of this article: Dolphin Research Disclaimer and General Disclosure