Intel's Data Center Miss Gives AMD More Room in Server Chips

Intel posted a 6% drop in data center revenue for the third quarter, a miss that investors said raises the odds of further market share erosion to AMD in the high-margin server chip business. The Santa Clara-based company reported $4.3 billion in data center and AI segment sales, below the $4.6 billion consensus, while overall revenue came in at $14.2 billion, roughly flat from a year earlier.

Chief Executive Pat Gelsinger told analysts on the conference call that the shortfall was concentrated in older server processors as some cloud customers shifted orders to newer products ahead of the planned 2025 launch of the "Clearwater Forest" architecture. “We’re seeing a pause in purchasing patterns as customers await the next generation,” Gelsinger said. He reaffirmed the company’s full-year revenue forecast of about $54 billion.

Shares fell 4.8% in extended trading after the report. The decline erased about $9 billion in market value and brought Intel’s year-to-date loss to 38%. Intel's client computing group, the largest segment by revenue, posted $7.3 billion in sales, down 3% from the prior year, as PC demand remained uneven.

The miss comes as AMD continues to gain ground in the data center CPU market. AMD’s EPYC server chips have taken an estimated 23% of the market, up from 18% a year ago, according to Mercury Research. Intel's main server chip line, Sapphire Rapids, has faced longer qualification cycles and competitive pricing from AMD, several analysts wrote in notes after the print.

Intel's foundry business, which manufactures chips for outside customers, reported $228 million in revenue, a 42% drop from the same quarter last year. The decline had been flagged earlier this year when Intel said the unit would take longer than expected to ramp. Gelsinger said foundry revenue would increase in the second half of 2025 as new design wins move into production.

Gross margin for the quarter came in at 44.2%, above the company’s own forecast of 43.5%, helped by lower input costs and a shift toward higher-margin products in the client segment. Analysts pointed to the data center weakness as the bigger structural concern. “The growth story in AI has been disproportionately in GPUs, and Intel is still waiting for its server CPU cycle to turn,” Stacy Rasgon of Bernstein said in a note.

Intel expects fourth-quarter revenue of $13.3 billion to $14.3 billion, with the midpoint slightly below the $14 billion consensus. Gelsinger said the company is on track to roll out its Arrow Lake client chips in the first quarter of 2025 and the Granite Rapids and Sierra Forest server chips later in the year. Those launches would determine whether Intel can recapture momentum in the data center, he said.

The INTC stock page shows an Alpha Score of 52 out of 100, reflecting a mixed view on valuation, earnings momentum, and technical positioning.

Gelsinger declined to comment on a report that Intel may cut more jobs beyond the 15% reduction announced in August. He said the company remains focused on cost discipline but did not rule further steps out.