On surface, the quarter was good. Coming into the quarter, Intel had five straight quarters of sizable beats versus consensus, especially on the revenue front. Here in Q3, revenues beat expectations. And earnings were in line. But obviously, markets do not care just about the headlines. That said, the quarter was led by strong consumer notebook demand and continued cloud growth, and the company generated $18.3 billion in revenue and delivered $1.11 in EPS. While CPUs are foundational to Intel's business, the company is also adding a range of other processing engines or XPUs to its portfolio. It has also made great strides in graphics and is now scaling its graphics architecture from integrated to discrete levels of performance. However, the concern is things are behind the competition.
So, what is the problem? The market was really displeased with the data centric revenues. Data-centric revenue was $8.5 billion, down 10% year over year on COVID-related weakness. PC-centric revenue was $9.8 billion, up 1% year over year on the strong aforementioned notebook PC demand in consumer and education segments and on increased supply. Gross margin for the quarter was 55%, two points below expectations due to lower data center ASPs, driven by mix shift from enterprise and government to cloud and lower PC client ASPs on increased demand for consumer and education PCs. That is a major problem.
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