INTEL (NASDAQ: INTC) stock trades at $56.28, down 50 percent over the past month despite reporting its strongest data center growth in 15 years. The disconnect reveals what's really weighing on the stock: foundry execution risk and a cash-negative 2027.
Intel's third-quarter results showed Data Center and AI revenue up 78 percent to $7.32 billion, with operating income for the segment jumping to $3.04 billion from $964 million a year prior. Total revenue climbed 20.9 percent to $16.51 billion. Non-GAAP EPS hit $0.52, beating the $0.40 consensus.
The data center story is genuinely compelling. Management said demand significantly exceeds available supply, with constraints persisting through 2027 and into 2028. The company projects the server CPU market could expand from $40 billion to over $200 billion within five years, driven by agentic AI workloads favoring energy-efficient processors. NVIDIA completed a $5 billion equity investment in Intel and selected the company to host CPUs for its DGX Rubin platform. Oracle entered a multiyear Xeon collaboration.
But here's the problem: Intel Foundry lost $1.85 billion in the quarter. External foundry revenue totaled just $411 million, with much of that from a one-time program. CFO David Zinsner stated plainly: "I don't think this will be a year in which we see positive cash flow." Fourth-quarter guidance projects revenue of $15.0 billion to $16.0 billion, non-GAAP EPS of $0.25, and 38 percent gross margin.
Intel faces specific headwinds. An incident at its Israeli fab will cost roughly $300 million in revenue. PC unit sales are expected to decline about 10 percent in 2027. The company raised $23 billion in equity, diluting shares to 5.44 billion—a meaningful overhang.
The stock trades at a 33x forward P/E on 2027 EPS estimates of $1.7987, up from $1.4866 for the current year. Analysts have raised 2027 EPS estimates seven times in 30 days with no cuts, signaling confidence in the long-term data center ramp. Yet the cash burn, foundry drag, and near-term guidance weakness explain why the stock has gained only 33 percent over eight years despite controlling a critical AI infrastructure market.
