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Intel Rides on Strong Gross Margin Expansion: Will it Sustain?

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Key Takeaways

  • INTC posted Q3 2025 non-GAAP gross profit of $5.45B, with operating margin rising to 40% from 18%.
  • Intel's Client Computing revenue rose to $8.53B as PC demand grew, aided by Windows 11 and AI PCs.
  • INTC cut cost of sales to $8.43B from $11.28B, reflecting cost discipline and a streamlined portfolio.

Intel Corporation (INTC - Free Report) reported a non-GAAP gross profit of $5.45 billion during the third quarter of 2025, up from $2.39 billion a year ago. Non-GAAP operating margin improves to 40% from 18% a year ago. The figure exceeded management guidance by 4%. The uptick was driven by multiple factors such as higher revenues, a favorable product mix and lower inventory reserves.

It is witnessing solid traction in the Client Computing Group. In the third quarter, the company reported revenues of $8.53 billion from this segment, up from $8.16 billion in the year-ago quarter. A rebounding PC market backed by growing adoption of Windows 11 PCs is a major growth driver. 

Moreover, it has also gained solid market traction in the growing AI PC market. Major PC manufacturers such as HP, Dell, ASUS, Acer and Samsung are collaborating with Intel to develop next-gen AI PCs. This is driving growth in the Client Computing Group and boosting gross margin.

Intel has made significant developments in its cost discipline initiatives and streamlined its portfolio to enhance efficiency across its operations. In the third quarter, the company’s cost of sales decreased to $8.43 billion, down from $11.28 billion in the year-ago quarter.

How Are Competitors Faring?

Intel faces competition from Advanced Micro Devices (AMD - Free Report) and NVIDIA Corporation (NVDA - Free Report) in the semiconductor space. In the third quarter, AMD reported a non-GAAP gross profit of $4.99 billion, up from $3.65 billion. Non-GAAP gross margin was 54%, up 40 basis points year over year, while it improved from 43.3% reported in Q2. Revenue growth and a healthy product mix are propelling the gross margin.

NVIDIA reported a Non-GAAP gross profit of $41.9 billion, up from $26.3 billion a year ago, with respective margins of 73.6% and 75%. The ongoing transition from offering Hopper HGX systems to Blackwell full-scale data center solutions is affecting gross margin. Sequentially, NVIDIA’s non-GAAP gross margin improved 90 basis points as Blackwell ramped with an improved mix and cost structure.

INTC’s Price Performance, Valuation and Estimates

Intel has rallied 78.2% over the past year compared with the industry’s growth of 28.5%.

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Going by the price/book ratio, the company's shares currently trade at 1.48 book value, lower than 32.65 of the industry average.

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Image Source: Zacks Investment Research

Earnings estimates for 2025 have increased 13.33% to 34 cents, while those for 2026 have declined 9.38% to 58 cents over the past 58 days.

Zacks Investment Research
Image Source: Zacks Investment Research

Intel stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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