In its July–September quarterly results, announced on October 29, 2026 (U.S. time), Intel's Data Center and AI group (DCAI) posted operating income of $3.039 billion. That exceeds the company's total operating income of $2.522 billion. Intel's operating profit is structured so that earnings from DCAI cover the costs of the Intel Foundry contract chip manufacturing business and corporate overhead. However, the ratio of DCAI operating income to total operating income has declined from a year earlier, suggesting the earnings structure is also improving.
Revenue up 21%, with DCAI, the growth driver, up 78%
According to Intel's official earnings release, revenue for July–September 2026 was $16.513 billion, up 21% year over year. Operating income under U.S. generally accepted accounting principles (GAAP) was $2.522 billion, about 3.7 times the $683 million of the same period a year earlier. Non-GAAP diluted earnings per share (EPS) were $0.52. For the October–December quarter, the company forecasts revenue of $15.0 billion to $16.0 billion and non-GAAP EPS of $0.25.
By business segment, DCAI drove the growth. Its revenue was $7.318 billion, up 78% from a year earlier, while revenue at the Client Computing and Physical AI Group (CCPG), which centers on PC products, was $8.097 billion, down 5%. Intel Foundry revenue rose 58% to $6.697 billion, but because that figure includes manufacturing transactions for Intel's other internal units, it cannot be regarded entirely as sales to external customers.
CFO David Zinsner explained that the data center business recorded its highest revenue growth rate in 15 years. At the same time, he indicated that the PC market slump is expected to continue until at least the first half of 2027. CEO Lip-Bu Tan also named expanding supply capacity to meet extremely strong demand for Xeon processors as the top near-term priority. While demand for server CPUs is growing, the sales environment for PC products is becoming tougher.
At its July earnings briefing, Intel also said it expected the 2026 PC market to shrink by a low-double-digit percentage for the full year, against a backdrop of rising memory prices and supply constraints. Beyond demand for CPUs themselves, the prices and availability of peripheral components such as memory are affecting the PC market as a whole. This is also an important factor for Japanese consumers considering future PC prices and installed memory capacity.
DCAI operating income exceeds the company total, covering losses elsewhere
The most notable point of this report is that DCAI's operating income alone exceeded Intel's total operating income. Comparing segment operating income for July–September 2026 with the same period a year earlier shows a major shift in the composition of profit.
| Segment | Jul–Sep 2026 ($100 million) | Jul–Sep 2025 ($100 million) |
|---|---|---|
| CCPG (PC/edge) | 22.85 | 26.94 |
| DCAI (data center/AI) | 30.39 | 9.64 |
| Intel Foundry | −18.53 | −23.21 |
| All Other | 1.79 | 1.00 |
| Unallocated corporate expenses | −10.58 | −7.82 |
| Intersegment eliminations/adjustments | −0.70 | 0.28 |
| Total operating income | 25.22 | 6.83 |
DCAI's operating income of $3.039 billion is about 1.20 times the company's total of $2.522 billion. Put differently, excluding DCAI's profit, Intel's operating result would be a loss of $517 million. CCPG also secured operating income of $2.285 billion, but Intel Foundry's operating loss of $1.853 billion and unallocated corporate expenses of $1.058 billion add up to a negative of about $2.911 billion. PC business profit alone cannot cover these, and DCAI's earnings are what support the company's overall profit.
DCAI's profitability also improved significantly. Its operating margin, operating income divided by revenue, was 41.5%, up 18.1 percentage points from 23.4% a year earlier. While revenue grew 78%, operating income expanded about 3.2 times, and the ratio of the $2.075 billion increase in profit to the roughly $3.2 billion increase in revenue reaches about 65%. This means profit grew sharply as revenue increased, but this ratio cannot be treated as is as a measure of cash generation or future margins.
Meanwhile, Intel Foundry's operating loss narrowed to $1.853 billion from $2.321 billion a year earlier. However, caution is needed about the effect of internal transactions when evaluating the unit's revenue of $6.697 billion. Across Intel, about $6.291 billion in intersegment revenue is eliminated in the consolidated results. Because this elimination amount also includes intersegment transactions other than Foundry's, external revenue cannot be calculated by simply subtracting it from Foundry's revenue.
A useful reference is Intel's quarterly report for April–June 2026. Foundry's external revenue for that quarter was only $293 million. To assess the scale of Foundry's earnings, it is necessary to separate manufacturing for Intel's own use from orders from external customers. The narrower operating loss shows improvement, but it alone does not allow a judgment that the contract manufacturing business for external customers has reached the point of being profitable.
Intel is also expanding its investment in semiconductor manufacturing. Capital expenditures for July–September were $4.219 billion, up about 43% from $2.956 billion a year earlier. In July, the company had already raised its full-year 2026 capital spending outlook to more than $20 billion, and it is pressing ahead with expanding manufacturing capacity. The report also said Intel completed a public stock offering of about $23 billion. While this funding and capital spending support future capacity expansion, the question remains whether Intel can continue to secure returns commensurate with the investment.
Reliance on DCAI is easing, but the structure supporting profit is unchanged
The view that DCAI's profit is supporting the company's overall profit can be countered by the argument that dependence has already begun to decline. The multiple of DCAI operating income to total operating income fell from 1.41 times in July–September 2025 and 1.38 times in April–June 2026 to 1.20 times this time. This is not because DCAI's profit fell. DCAI's operating income grew substantially, but total operating income also improved, owing to factors such as the narrower Foundry loss, so the relative multiple declined.
Lower manufacturing costs are also part of the Foundry improvement. At its July earnings briefing, Intel explained that it had cut manufacturing costs by about 50% since the start of the year for the main models of "Panther Lake," which is made on the Intel 18A process. The figure shows that manufacturing yields and production efficiency are improving, and it is an important data point for considering the narrower Foundry loss. However, lower manufacturing costs for a specific product are a separate matter from the Foundry business as a whole turning profitable.
Even so, the view that DCAI supports the company's overall operating profit can still be maintained at this point. The multiple is above 1, and excluding DCAI, the company's operating result would be a loss. However, the composition of profit differs greatly from a year earlier.
In July–September 2025, DCAI's operating income was $964 million, only about 31% of the combined $3.103 billion of Foundry's operating loss of $2.321 billion and unallocated corporate expenses of $782 million. At that time, CCPG secured operating income of $2.694 billion, and the PC business was a major pillar of profit. By contrast, in July–September 2026, DCAI's operating income of $3.039 billion exceeded the combined $2.911 billion of the Foundry loss and unallocated corporate expenses by $128 million. The central role in covering losses has shifted from the PC business to the data center business.
That said, there is no guarantee that DCAI's high operating margin will continue. As of July, Intel had indicated that supply constraints on server CPUs would continue for the time being, and it cited pricing measures as one factor behind April–June gross margin exceeding expectations. It is unclear whether the high margins earned under limited supply will be maintained after increased production eases the supply-demand balance. Unallocated corporate expenses also rose to $1.058 billion from $782 million a year earlier. Compared with $1.416 billion in April–June 2026, however, they decreased, so the cost picture is not moving in only one direction.
The company's forecast for the next quarter, October–December, also deserves attention. The forecast revenue range is $15.0 billion to $16.0 billion, and the midpoint of $15.5 billion is about 6% below the July–September actual. Non-GAAP gross margin is also expected to fall 6.1 percentage points, from 44.1% this time to 38.0%. The earnings release does not explain in detail the factors behind the lower gross margin, nor does it make clear how segment profits will change. In July, Intel had indicated that the expansion in server product supply would be concentrated from the end of July–September into October–December, but how increased production will affect margins will need to be confirmed in future results.
The clearest test of this view lies in the next results, for October–December 2026. If DCAI's operating income falls below the company's total operating income while overall operating profit continues, the current structure in which DCAI's profit alone offsets other segments' losses will break down. If Foundry's loss narrows further and corporate expenses stay flat, the multiple could fall below 1 even without growth in DCAI's profit.
Meanwhile, CCPG's operating income has fallen from $2.694 billion a year earlier to $2.285 billion, and if the PC market slump continues, dependence on DCAI could rise again. What to watch in the next report, therefore, is not only the amount of DCAI's profit. How far the narrowing of Foundry's losses and the slowdown in the PC business each progress, and in which direction this quarter's multiple of 1.20 moves, will be an important indicator for judging the change in Intel's earnings structure.