Intel (INTC)

Computer processor maker Intel (NASDAQ:INTC) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 2.8% year on year to $13.65 billion. On the other hand, next quarter’s revenue guidance of $13.3 billion was less impressive, coming in 0.8% below analysts’ estimates. Its non-GAAP profit of $0.08 per share was significantly above analysts’ consensus estimates.

Company Overview

Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ:INTC) is a leading manufacturer of computer processors and graphics chips.

Intel's primary competitors are Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM).

Chips need to keep getting smaller in order to advance on Moore’s law, and that is proving increasingly more complicated and expensive to achieve with time. That has caused most digital chip makers to become “fabless” designers, rather than manufacturers, instead relying on contracted foundries like TSMC to manufacture their designs. This has benefitted the digital chip makers’ free cash flow margins, as exiting the manufacturing business has removed large cash expenses from their business models. Read More. The semiconductor industry is broadly divided into analog and digital semiconductors. Digital chips are what most people think of as the brains of almost every electronic device. Their primary purpose is to either store (memory chips) or process (CPUs/GPUs) data. Digital chips derive their processing power from the number of transistors that can be packed on an individual chip. In chip design, nanometers or “nm” refers to the length of a transistor gate – the smaller the gate the more processing power that can be packed into a given space. In 1965, Intel’s founder Gordon Moore famously predicted a doubling of transistors on a chip every two years. The concept, known as Moore’s Law, was based on his belief that the technology used to create semiconductors would improve continuously, allowing chips to become ever smaller and ever more powerful.

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Intel’s demand was weak over the last five years as its sales fell at a 7.3% annual rate. This was below our standards and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Intel’s revenue over the last two years was flat, sugggesting its demand was weak but stabilized after its initial drop.

This quarter, Intel reported modest year-on-year revenue growth of 2.8% but beat Wall Street’s estimates by 3.7%. Company management is currently guiding for a 6.7% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 1.2% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will face some demand challenges.

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Intel’s DIO came in at 124, which is 3 more days than its five-year average, suggesting that the company’s inventory levels have grown slightly above the long-term average.

In the semiconductor industry, a company’s gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

Intel’s gross margin is one of the worst in the semiconductor industry, signaling it operates in a competitive market and lacks pricing power. As you can see below, it averaged a 36.5% gross margin over the last two years. That means Intel paid its suppliers a lot of money ($63.49 for every $100 in revenue) to run its business.

Intel’s gross profit margin came in at 38.2% this quarter, down 1.6 percentage points year on year. Intel’s full-year margin has also been trending down over the past 12 months, decreasing by 10 percentage points. If this move continues, it could suggest deteriorating pricing power and higher input costs (such as raw materials and manufacturing expenses).

Although Intel was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 11% over the last two years. Unprofitable semiconductor companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Looking at the trend in its profitability, Intel’s operating margin decreased by 31.1 percentage points over the last five years. Intel’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Intel generated an operating margin profit margin of 5%, up 73.2 percentage points year on year. The increase was solid, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Intel, its EPS declined by 46.2% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into Intel’s earnings to better understand the drivers of its performance. As we mentioned earlier, Intel’s operating margin expanded this quarter but declined by 31.1 percentage points over the last five years. Its share count also grew by 7.6%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q3, Intel reported adjusted EPS of $0.08, up from negative $0.46 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Intel’s full-year EPS of $0.24 to grow 68.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While Intel posted positive free cash flow this quarter, the broader story hasn’t been so clean. Intel’s demanding reinvestments have drained its resources over the last two years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 6.8%, meaning it lit $6.84 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Intel’s margin dropped by 34.6 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Intel’s free cash flow clocked in at $896 million in Q3, equivalent to a 6.6% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Intel historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.3%, lower than the typical cost of capital (how much it costs to raise money) for semiconductor companies.

Intel reported $30.94 billion of cash and $46.55 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $14.41 billion of EBITDA over the last 12 months, we view Intel’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $4.19 billion of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Intel beat analysts’ EPS expectations this quarter. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. On the other hand, its revenue guidance for next quarter slightly missed and its inventory levels slightly increased. Overall, we think this was still a decent quarter with some key metrics above expectations. The stock traded up 8.7% to $41.48 immediately following the results.

Updated: December 4, 2025 at 9:25 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Intel.

We see the value of companies furthering technological innovation, but in the case of Intel, we’re out. To kick things off, its revenue has declined over the last five years. On top of that, Intel’s declining EPS over the last five years makes it a less attractive asset to the public markets, and its declining operating margin shows the business has become less efficient.

Intel’s P/E ratio based on the next 12 months is 103.1x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $37.27 on the company (compared to the current share price of $40.61), implying they don’t see much short-term potential in Intel.