HSBC: Intel’s third-quarter margins beat expectations; fourth-quarter guidance far below expectations

Where did the third-quarter beat come from?

Intel’s third-quarter revenue was 16.513 billion dollars, up 2% quarter over quarter, within the company’s guidance range of 15.8 billion to 16.8 billion dollars; revenue was slightly above Visible Alpha consensus of 16.4 billion dollars, but below HSBC’s estimate of 17 billion dollars.
Profitability was stronger: non-GAAP gross margin was 44.1%, above the approximately 41.9% to 42.0% expected by HSBC and consensus; non-GAAP EPS was 0.52 dollars, also above HSBC’s estimate of 0.44 dollars, consensus of 0.39 dollars, and company guidance of 0.38 dollars.

The company’s fourth-quarter revenue guidance is 15 billion to 16 billion dollars, with a midpoint of 15.5 billion dollars, implying a quarter-over-quarter decline of about 6% from actual third-quarter revenue. This midpoint is about 15% below HSBC’s prior estimate of 18.3 billion dollars and about 9% below consensus of 17 billion dollars.
HSBC attributed the across-the-board fourth-quarter guidance miss to the PC slowdown; the company expects the slowdown in PCs to continue through the first half of 2027.

Fourth-quarter non-GAAP gross margin guidance is 38.0%, 6.1 percentage points below the actual 44.1% in the third quarter, and also below HSBC’s estimate of 42.7% and consensus of 42.5%. Based on company guidance, non-GAAP gross profit will fall from 7.284 billion dollars in the third quarter to 5.89 billion dollars, a decline of about 19%.
Fourth-quarter non-GAAP EPS guidance is 0.25 dollars, 50% below HSBC’s estimate of 0.50 dollars and about 42% below consensus of 0.43 dollars. Revenue is down about 6% quarter over quarter, while the EPS guidance cut is larger, reflecting simultaneous pressure on revenue and margins.