Written by: Rita
Adjusted EPS for the third quarter was $0.52, significantly above the market consensus of $0.39; however, guidance for fourth-quarter adjusted EPS dropped sharply to $0.25. Goldman Sachs noted in its earnings quick take on October 29, 2026, that prior to the earnings report, investors had been optimistic due to strong demand for servers, advances in advanced packaging, and process improvements, but weakness in the PC business and cautious forward comments subsequently dampened those expectations.
Goldman Sachs expects equities to face downward pressure in the short term. The report highlights a specific contradiction: while the data center business is growing, overall profitability remains constrained by the client computing segment. For Intel to sustain its profit recovery, improvements in product demand, market share, and manufacturing must align in tandem.
This quarter's profit outperformed revenue.
Revenue showed slight divergence. In the third quarter, Intel's revenue was $16.513 billion, representing a 20.9% year-over-year increase and a 2.4% sequential growth. The market consensus was $16.419 billion, while Goldman Sachs' original forecast was $17.027 billion. Revenue slightly exceeded the overall market expectation but fell short of Goldman Sachs' own estimate, indicating that the strength of growth did not broadly surpass expectations.
Profit performance was significantly stronger. Adjusted gross margin reached 44.1%, above the market expectation of 41.9%; adjusted EPS was $0.52, exceeding the consensus of $0.39. While revenue only slightly surpassed consensus, the notable outperformance in profits was the primary basis for the quarter’s solid results.
Goldman Sachs also recorded operational improvements. Operating profit, excluding stock-based compensation expenses, amounted to $3.237 billion, with an operating profit margin of 19.6%. The company’s ability to convert revenue into profit has strengthened, and the recovery in profitability is more compelling than revenue growth alone.
However, this quick review places greater emphasis on the sources of growth. There are significant differences among Intel’s various business segments: server and manufacturing-related businesses performed well, while client business remained weak. Improvements in total revenue and profit must be understood within the context of the product mix.
Servers and PCs continue to diverge
The performance of the business lines moved in opposite directions. The Client Computing Group generated revenue of $8.097 billion in the third quarter, falling approximately 8.9% below market consensus and also declining year-over-year. In contrast, the Data Center and AI Group achieved revenue of $7.318 billion, exceeding consensus by approximately 11.1%. During the same quarter, these two key business segments showed opposing variance against expectations.
Goldman Sachs noted that demand for server processors has been a key source of optimism ahead of the earnings report. Corporate procurement of computing power has provided demand support for Intel; the market is also monitoring whether it can maintain and grow its server market share. This growth trajectory involves both industry demand and the company’s competitiveness.
The weakness in PC business explains why the report highlights client-side prospects in its title. While server demand has improved, it has not yet propelled all products into a strong growth phase. The divergence in revenue structure makes the company’s overall profit recovery more vulnerable to fluctuations in individual businesses.
Intel's foundry revenue was $6.697 billion, exceeding market expectations. Goldman Sachs highlighted external foundry progress and advanced packaging outlook as key focus points on the earnings call. For Intel, customer adoption progress and production capacity upgrades are critical pillars supporting the long-term value of its manufacturing business.
Profit expectations for the fourth quarter are under pressure.
The significant downward revision to guidance has dampened profit expectations. The company provided a revenue range of $15 billion to $16 billion for the fourth quarter, with a midpoint of $15.5 billion, below the market consensus of $17.018 billion. On a reported basis, the midpoint is 8.9% lower than consensus and implies a sequential revenue decline of 6.1%. Goldman Sachs’ original growth expectations now face clear downward pressure.
Gross margin guidance was also weak. The company expects an adjusted gross margin of 38%, below the market consensus of 42.5%. Lower-than-expected sales volume and lagging gross margin will therefore transmit operating pressures in the fourth quarter along both revenue and profitability pathways.
The adjusted EPS guidance of $0.25 is below the market expectation of $0.43. Goldman Sachs characterized this forward-looking figure as significantly weaker than market expectations. The stronger profit performance in the third quarter failed to carry over into the company’s guidance for the next quarter.
This is also the main reason Goldman Sachs expects short-term stock price weakness. Prior to the earnings report, the market was already pricing in positive signals regarding servers, packaging, and manufacturing. After the guidance was released, investors need to readjust their near-term earnings expectations, with the pace of margin recovery becoming the focal point.
Manufacturing upgrades still require demand support.
The long-term valuation assessment remains cautious. Goldman Sachs maintains a neutral rating with a 12-month target price of $150. Its valuation is based on a normalized EPS of $5 and a P/E ratio of 30. This framework places significant emphasis on Intel’s medium-term profitability, with the current quarter’s improvement being just one step in the recovery process.
Goldman Sachs' upside factors include increased adoption of contract manufacturing services, improved server demand and market share, and stronger-than-expected margin recovery. These factors correspond to the manufacturing, product, and financial sides, respectively. For the company to unlock sustained profitability, multiple business lines must work in tandem.
The report also retains two key downside risks: slower-than-expected ramp-up of advanced process technologies and a decline in market share for server processors. The former relates to manufacturing capacity upgrades, while the latter pertains to competitive market dynamics. Even if industry demand continues to grow, the company’s own delivery performance and market share will still impact its operating results.
Capital expenditure outlook is also a key focus for Goldman Sachs. Manufacturing upgrades require investment, and customer adoption and demand growth determine how these investments translate into sales. Market evaluation of Intel thus simultaneously involves near-term profitability, future products, and the return on factory investments.
Following Goldman Sachs' analysis, the server business has provided growth momentum, but PC demand and gross margins continue to weigh on the overall recovery pace. For investors following Intel, patience is still required until there is clear evidence of PC business stabilization and timely progress in foundry node execution; until then, carefully assess short-term downside risks.
Disclaimer
This article is a compilation and interpretation by Chaoxiang Research of a third-party brokerage research report (Goldman Sachs Group, October 29, 2026), combined with publicly available market information. The ratings, price targets, earnings forecasts, and related judgments cited herein reflect the views of the brokerage’s analysts and represent only the position of their respective institution; they do not reflect the views of Chaoxiang Research nor constitute any investment advice.
The market carries risks; make decisions independently. This article should not be used as a basis for buying or selling any securities.