# How Intel makes money

CXProWealth Business Lens · Intel (INTC) · Q3 FY2026

Read from the 10-Q for the period 2026-06-28 to 2026-09-26, filed 2026-10-30 with the SEC (accession 0000050863-26-000191): https://www.sec.gov/Archives/edgar/data/50863/000005086326000191/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $16.5B (+20.9% on the year)
- Operating income: $2.5B (operating margin 15.3%)
- Net income: $3.3B (net margin 20.1%)
- Gross margin: 43.0%
- Free cash flow: $1.1B (6.4% of revenue)
- Cash conversion (operating cash flow / net income): 1.53x
- Capital expenditure: 24.4% of revenue

## Where the money goes (Q3 FY2026)

- Net revenue → Cost of sales: $9.4B
- Net revenue → Gross profit: $7.1B
- Gross profit → Operating expenses: $4.6B
- Operating expenses → Research and development: $3.5B
- Operating expenses → Marketing, general, and administrative: $1.0B
- Operating expenses → Restructuring and other charges: $54.0M
- Gross profit → Operating income (loss): $2.5B
- Operating income (loss) → Income (loss) before taxes: $2.5B
- Interest and other, net → Income (loss) before taxes: $1.1B
- Gains (losses) on equity investments, net → Income (loss) before taxes: $330.0M
- Income (loss) before taxes → Provision for (benefit from) taxes: $462.0M
- Income (loss) before taxes → Net income (loss): $3.5B
- Net income (loss) → Less: net income (loss) attributable to non-controlling interests: $200.0M
- Net income (loss) → Net income (loss) attributable to Intel: $3.3B

## Where the revenue comes from

### Segments (Operating Segments - Financial Information by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| Ccpg | $8.1B | 49.0% |
| Dcai | $7.3B | 44.3% |
| Intel Foundry | $6.7B | 40.6% |
| All Other | $692.0M | 4.2% |

The members do not sum to total revenue.

### ConsolidationItems (Operating Segments - Financial Information by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating segments | $15.4B | 93.4% |
| Intersegment Eliminations | -$6.3B | -38.1% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Net revenue | $16.5B | 100% |
| Cost of sales | $9.4B | 57.0% |
| **Gross profit** | $7.1B | 43.0% |
| Research and development | $3.5B | 21.1% |
| Marketing, general, and administrative | $1.0B | 6.2% |
| Restructuring and other charges | $54.0M | 0.3% |
| **Operating expenses** | $4.6B | 27.7% |
| **Operating income (loss)** | $2.5B | 15.3% |
| Gains (losses) on equity investments, net | $330.0M | 2.0% |
| Interest and other, net | $1.1B | 6.8% |
| **Income (loss) before taxes** | $4.0B | 24.1% |
| Provision for (benefit from) taxes | $462.0M | 2.8% |
| **Net income (loss)** | $3.5B | 21.3% |
| Less: net income (loss) attributable to non-controlling interests | $200.0M | 1.2% |
| **Net income (loss) attributable to Intel** | $3.3B | 20.1% |
| Earnings (loss) per share attributable to Intel—basic (in dollars per share) | $1 | 0.0% |
| Earnings (loss) per share attributable to Intel—diluted (in dollars per share) | $1 | 0.0% |
| Basic (in shares) | 5,244,000,000 |  |
| Diluted (in shares) | 5,307,000,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2007 | $38.3B | $8.2B | $7.0B | $12.6B | $5.0B | $7.6B |
| FY2008 | $37.6B | $9.0B | $5.3B | $10.9B | $5.2B | $5.7B |
| FY2009 | $35.1B | $5.7B | $4.4B | $11.2B | $4.5B | $6.7B |
| FY2010 | $43.6B | $15.6B | $11.5B | $16.7B | $5.2B | $11.5B |
| FY2011 | $54.0B | $17.5B | $12.9B | $21.0B | $10.8B | $10.2B |
| FY2012 | $53.3B | $14.6B | $11.0B | $18.9B | $11.0B | $7.9B |
| FY2013 | $52.7B | $12.3B | $9.6B | $20.8B | $10.7B | $10.1B |
| FY2014 | $55.9B | $15.3B | $11.7B | $20.4B | $10.1B | $10.3B |
| FY2015 | $55.4B | $14.0B | $11.4B | $19.0B | $7.3B | $11.7B |
| FY2016 | $59.4B | $13.1B | $10.3B | $21.8B | $9.6B | $12.2B |
| FY2017 | $62.8B | $18.1B | $9.6B | $22.1B | $11.8B | $10.3B |
| FY2018 | $70.8B | $23.3B | $21.1B | $29.4B | $15.2B | $14.3B |
| FY2019 | $72.0B | $22.0B | $21.0B | $33.1B | $16.2B | $16.9B |
| FY2020 | $77.9B | $23.7B | $20.9B | $35.9B | $14.3B | $21.6B |
| FY2021 | $79.0B | $19.5B | $19.9B | $29.5B | $18.7B | $10.7B |
| FY2022 | $63.1B | $2.3B | $8.0B | $15.4B | $24.8B | -$9.4B |
| FY2023 | $54.2B | $93.0M | $1.7B | $11.5B | $25.8B | -$14.3B |
| FY2024 | $53.1B | -$11.7B | -$18.8B | $8.3B | $23.9B | -$15.7B |
| FY2025 | $52.9B | -$2.2B | -$267.0M | $9.7B | $14.6B | -$4.9B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: -0.5% (year before -2.1%): steady
- Operating income: — (year before -12,657.0%): too short a history to read
- Net income: — (year before -1,210.5%): too short a history to read
- Free cash flow: — (year before —): too short a history to read

## Key insights

### Data center profit exceeds Intel's whole operating income

DCAI earned $3.0B, 120.5% of Intel's $2.5B operating income, while Intel Foundry's $1.9B loss offset 61.0% of that data center profit.

Segment margins differ widely. Data Center and AI (DCAI) earned $3.0B of operating income on $7.3B of revenue, a 41.5% segment margin. The Client Computing and Physical AI Group (CCPG) earned $2.3B on $8.1B, a 28.2% margin. Intel Foundry lost $1.9B on $6.7B of revenue, a loss equal to 27.7% of its revenue. _(from the filing)_
Intel Foundry sells mainly to Intel itself: intersegment eliminations of $6.3B equal 93.9% of Foundry's $6.7B of revenue. The filing says the substantial majority of Intel's consolidated depreciation expense is incurred by Intel Foundry, so the factories carry the cost while the product segments carry the profit. _(from the filing)_
Analysis: the consolidated 15.3% operating margin is a blend of a profitable product business and a loss-making manufacturing business. Segment results depend on the internal prices Intel sets between its own units, so the split between product profit and Foundry loss is partly an accounting choice, while the total is not. _(analysis)_

### Revenue rose 20.9% while operating expenses rose 0.9%

With operating expenses nearly flat, a 20.9% revenue rise lifted operating income 269% to $2.5B and operating margin 10.27 points to 15.3%.

Net revenue rose to $16.5B from $13.7B a year earlier, while cost of sales rose 11.6% to $9.4B. Gross margin reached 43.0%, up 4.75 points from 38.2%. Operating expenses rose 0.9% to $4.57B: research and development grew 8.0% to $3.49B, marketing, general and administrative fell 8.8% to $1.03B, and restructuring charges fell to $54M from $175M. _(from the filing)_
The quarters show the lever at work. Operating income was a loss of $3.1B in Q1 FY2026, then $1.8B in Q2 FY2026 and $2.5B in Q3 FY2026, as quarterly revenue rose from $13.6B to $16.1B and then $16.5B. _(from the filing)_
The same lever cut the other way in the down cycle: revenue fell from $79.0B in FY2021 to $53.1B in FY2024, and operating income went from $19.5B to a loss of $11.7B. _(from the filing)_
Analysis: the filing figures do not separate how much of the margin gain came from more volume through fixed factory and research costs and how much from a richer mix of data center chips. The volume part reverses if revenue falls; the mix part holds only as long as data center demand does. _(analysis)_

### Net income fell as operating income rose sharply

Net income attributable to Intel fell 18.3% to $3.32B because interest and other, net dropped to $1.13B from $3.67B, which held the Altera gain.

Interest and other, net was 80.2% of income before taxes a year earlier and 28.4% now. A year earlier it held the pre-tax gain on the sale of a majority stake in Altera. This quarter it holds a gain on the mark-to-market of shares held in escrow for the U.S. Department of Commerce, which the filing says can swing in either direction from quarter to quarter. _(from the filing)_
The swing can be large. In Q2 FY2026 Intel reported operating income of $1.8B and a net loss of $11.0B. This quarter net income attributable to Intel of $3.32B sits above operating income of $2.5B, helped by $1.13B of interest and other and $330M of gains on equity investments. _(from the filing)_
Analysis: because the Escrowed Shares are marked to market, a rising Intel share price tends to produce a loss on this line and a falling one a gain. Operating income is the cleaner read of how the business itself performed. _(analysis)_

### Operating cash now covers the factory building program

Capital spending of $4.0B used 79.2% of $5.1B operating cash flow, leaving $1.06B of free cash flow after negative free cash flow every year from FY2022 to FY2025.

Free cash flow was $9.4B negative in FY2022, $14.3B negative in FY2023, $15.7B negative in FY2024 and $4.9B negative in FY2025, while capital spending peaked at $25.8B in FY2023 against operating cash flow of $11.5B. _(from the filing)_
This quarter operating cash flow rose to $5.1B from $2.5B a year earlier, and capital spending rose to $4.0B from $2.4B, equal to 24.4% of revenue. A year earlier capital spending took 95.2% of operating cash flow and free cash flow was $121M; this quarter it was $1.06B. _(from the filing)_
Analysis: quarterly cash flow is uneven. Free cash flow was negative $2.5B in Q1 FY2026 and positive $4.45B in Q2 FY2026, so the full-year pattern matters more than any one quarter. _(analysis)_

### Competitive edge

- **Intel's own products give its factories a base load** Sales to Intel's product segments equal 93.9% of Intel Foundry's $6.7B revenue, so the factories run on a large base of internal volume.
- **Data center chips earn a 41.5% segment margin** DCAI's 41.5% margin against CCPG's 28.2% means every shift of output toward the data center raises Intel's overall profitability.

### What to watch

- **Intel Foundry still loses money serving mostly Intel** Intel Foundry lost $1.9B, 27.7% of its revenue, and the filing names winning significant external customers as an open risk.
- **New shares cut earnings per share as profit rose** Basic shares rose to 5.24 billion from 4.51 billion, so diluted earnings per share fell to $0.60 from $0.90.
- **Substrate and memory shortages constrain the supply chain** The filing names current industry-wide substrate and memory shortages, tariffs, export controls and several regional tensions as pressures on supply and sales.

## Operating income by segment

- Dcai: $3.0B (120.5% of operating income)
- Ccpg: $2.3B (90.6% of operating income)
- All Other: $179.0M (7.1% of operating income)
- Intel Foundry: -$1.9B (-73.5% of operating income)

## Investor view

**Intel's data center chips earned more than its whole operating profit, while Intel Foundry lost $1.9B**

### How it makes money

Intel earns its money selling processors through two product segments. The Client Computing and Physical AI Group (CCPG) brought in $8.1B this quarter, 49.0% of net revenue of $16.5B. Data Center and AI (DCAI) brought in $7.3B, 44.3% of net revenue. Together the two product segments came to $15.4B. _(from the filing)_
The chips are made by Intel Foundry, which reported $6.7B of revenue. Most of that is sales to Intel's own product segments: intersegment eliminations of $6.3B, equal to 93.9% of Foundry's revenue, are removed in consolidation. The filing says the substantial majority of Intel's consolidated depreciation expense is incurred by Intel Foundry, which is why the factories carry the cost while the products carry the profit. _(from the filing)_
Segment profit shows where the money is made. DCAI earned $3.0B of operating income on $7.3B of revenue, a 41.5% segment margin. CCPG earned $2.3B on $8.1B, a 28.2% margin. Intel Foundry lost $1.9B, a loss equal to 27.7% of its revenue. DCAI alone earned 120.5% of Intel's consolidated operating income of $2.5B. _(from the filing)_
Below operating income, a second stream moves the bottom line. Interest and other, net added $1.13B, and gains on equity investments added $330M. Interest and other was 28.4% of income before taxes of $3.98B this quarter. The filing explains that this line now holds the mark-to-market of shares held in escrow for the U.S. Department of Commerce, which can swing in either direction from quarter to quarter. _(from the filing)_

### What shifted

Net revenue rose 20.9% to $16.5B from $13.7B a year earlier, while cost of sales rose 11.6% to $9.4B. Gross margin reached 43.0%, up 4.75 points from 38.2%. Gross profit of $7.1B was the highest of the last eight quarters, against $5.2B a year earlier. _(from the filing)_
Intel's results release shows the growth came from the data center: DCAI revenue rose steeply while CCPG revenue fell, and Intel Foundry revenue grew with the demand it serves inside Intel. The chief executive said the immediate priority is to unlock additional supply to meet demand for the Xeon family, and the chief financial officer said the company sees the PC slowdown continuing at least through the first half of next year. _(sourced)_
Costs below gross profit barely moved. Operating expenses rose 0.9% to $4.57B as revenue rose 20.9%. Research and development grew 8.0% to $3.49B, falling to 21.1% of revenue, down 2.53 points. Marketing, general and administrative fell 8.8% to $1.03B, and restructuring charges fell to $54M from $175M. Operating income rose to $2.5B from $683M, and operating margin rose 10.27 points to 15.3%. _(from the filing)_
Net income attributable to Intel still fell 18.3% to $3.32B from $4.06B. The difference is below the operating line: interest and other, net fell to $1.13B from $3.67B. A year earlier that line held the pre-tax gain on the sale of a majority stake in Altera. This quarter it holds a gain on the mark-to-market of the Escrowed Shares. Interest and other was 80.2% of income before taxes a year earlier and 28.4% now. _(from the filing)_
Each share earned less. Diluted earnings per share fell to $0.60 from $0.90 as the basic share count rose to 5.24 billion from 4.51 billion. The filing lists the sources: shares sold to SoftBank and NVIDIA, shares issued under the agreement with the U.S. government, and an underwritten public offering completed during the quarter. Operating cash flow rose to $5.1B from $2.5B, capital spending rose to $4.0B from $2.4B, and free cash flow was $1.06B against $121M. _(from the filing)_

### Risks in the filing

Intel names the core bet as its first risk: research, development and manufacturing investments "that may not realize a favorable return", the complexity of new products and process technologies, and its pursuit of next-generation leading-edge processes together with the effort to win design commitments from significant external customers. _(from the filing)_
The filing names its funding and ownership as risks: alternative financing arrangements and the pursuit of government grants, "the U.S. government's acquisition of significant equity interests in us", and its debt obligations and ability to access sources of capital. _(from the filing)_
It names supply and geopolitics: the supply chain, "including current industry-wide substrate and memory shortages", tariffs and export controls, and tensions involving the U.S. and China, China and Taiwan, Israel and the Middle East, and Russia and Ukraine. _(from the filing)_
It names the market itself: competition and rapid technological change, changes in demand and margins, the evolving AI market, customer concentration and reliance on distributors, and product defects and security vulnerabilities. _(from the filing)_
Two of these already show in the numbers. The return on manufacturing investment is visible in Intel Foundry, which still reports an operating loss while running mostly for Intel's own products. The cost of the financing choices is visible in the share count, which rose sharply over the year and is why earnings per share fell while operating income rose. _(analysis)_

## Founder view: mechanisms

### An internal customer anchors a capital-heavy unit

Intel runs its factories as a separate business, Intel Foundry, whose main customer is Intel's own product segments. The product side guarantees the factories a base load of volume, and the separate accounts make the true cost of manufacturing visible instead of burying it in product margins. The aim is to turn that base load into a platform outside customers will also buy from. _(analysis)_

### A fixed cost base turns volume into margin

Most of Intel's costs do not move with each extra chip: factory depreciation, research and the overhead of running the company. When volume rises, revenue grows faster than cost and most of each added dollar reaches operating income. The same lever works in reverse, which is how the years of falling revenue became operating losses. _(analysis)_

### Scarce supply goes to the highest-margin product

Intel sells two families from the same factories: client processors for PCs and data center processors. When capacity is tight and data center chips earn more per dollar of revenue, shifting output toward them lifts the company's margin even if total volume barely changes. Management describes this quarter's constraint as supply for the data center line. _(analysis)_

### Capacity built ahead of revenue, funded by new shares

Intel spent heavily on factories while revenue was falling, so cash from operations did not cover the building program for several years. The gap was closed with outside money: partners in factory projects, government agreements and new shares. The cost of that choice is borne by existing shareholders as a larger share count, and it pays off only if the new capacity is used. _(analysis)_

## Member research

Signed-in members read, on the page: what Intel's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Intel 10-Q for the period to 2026-09-26: https://www.sec.gov/Archives/edgar/data/50863/000005086326000191/ (2026-10-30)
- Intel Reports Third-Quarter 2026 Financial Results: https://www.intc.com/news-events/press-releases/detail/1786/intel-reports-third-quarter-2026-financial-results (2026-10-29)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02