Intel's Government Gamble: The Numbers Behind the National Security Stock
The market saw Intel’s third-quarter earnings and reacted with a Pavlovian surge, sending the stock up 6% in after-hours trading. On the surface, the numbers validated the optimism that has driven the intel stock price up over 87% year-to-date. Revenue of $13.65 billion beat estimates. A net income of $4.1 billion marked a dramatic reversal from the staggering $16.6 billion loss a year prior. It’s the kind of headline report, like Intel beats on sales in first earnings report since U.S. government became top shareholder - CNBC, that makes for great television segments and bullish morning newsletters.
But a dispassionate look at the filings reveals a different story. This isn't a simple corporate turnaround. It's a state-sponsored project, a high-stakes bet on national security wrapped in a semiconductor company. This was the first earnings report since the U.S. government effectively became Intel’s top shareholder, acquiring a 10% stake in August through an $8.9 billion investment negotiated by the Trump administration. Intel CEO Lip-Bu Tan didn’t mince words, stating the company was "fully committed to advancing the Trump administration’s vision to restore semiconductor production."
This isn't just about making better chips. This is about policy. The government didn't invest in Intel because its data center division was showing stellar growth (it was down 1%) or because its PC business was a revolutionary force (it was merely stable). The U.S. government bought into a promise: the Intel Foundry. And the numbers suggest that, for now, this promise is being propped up by little more than accounting and political will.
A Foundry Built on Faith
The entire bull case for the new Intel rests on the success of Intel Foundry, the division meant to compete with global giants like TSMC by manufacturing chips for other companies. The strategic pivot requires a capital investment that will approach $100 billion. The government’s cash infusion is the down payment.
So, how is this world-changing, nation-saving division performing? In the third quarter, Intel Foundry reported $4.2 billion in sales. A respectable figure, until you read the fine print: 100% of that revenue came from internal Intel chip production. The division is, for all practical purposes, paying itself. To make matters worse, even this internal, self-generated revenue was down 2% year-over-year.
I've looked at hundreds of these filings, and the way they segment this internal revenue is… creative. It paints a picture of a bustling, multi-billion-dollar business unit, but the cash register is only ringing for transactions between two Intel departments. It’s like a car company building a massive, state-of-the-art factory, and then celebrating its "sales" for the year, which consist entirely of the cars it moved from the factory floor to its own corporate parking lot. Is it activity? Yes. Is it a business? Not yet.
The core problem remains unsolved: Intel Foundry has not yet secured a single major external customer. While a $5 billion investment from Nvidia to integrate CPUs and GPUs is a positive development, it's a strategic partnership, not a flagship foundry contract. The foundry was built to serve the Apples and Qualcomms of the world. So far, none have signed on. The question is no longer if they can build the fabs—production on their advanced 18A process has begun—but if anyone will actually use them. What happens if you throw a $100 billion party and nobody comes?
The Anatomy of a Profit
If the foundry isn’t generating real revenue, where did that $4.1 billion in net income come from? The answer is less about growth and more about contraction. A year ago, Intel employed 124,100 people. Today, that number is 88,400. That’s a reduction of 35,700 employees—to be more exact, a 28.7% cut in its workforce. This aggressive cost-cutting is the primary driver behind the swing from a massive loss to a tidy profit. It’s a necessary, if painful, move for a company restructuring, but it’s not a signal of organic, top-line growth.
The market seems to be ignoring this discrepancy. It’s pricing INTC stock not on its current operational reality but on its geopolitical importance. The government's investment (of which $5.7 billion was received this quarter) acts as a powerful backstop, creating a floor for the stock that has little to do with quarterly performance. There are still lingering uncertainties, too. The company is awaiting SEC approval for its accounting method regarding the government’s stake, a decision delayed by the recent government shutdown.
The balance sheet is a complex tapestry of genuine product sales, massive cost reductions, and direct government funding. The market is cheering the final picture, but it seems wholly uninterested in the threads used to weave it. The Client Computing Group, which sells PC and laptop chips, is the workhorse, pulling in $8.5 billion. But the future, the story, the entire reason for the 87% run-up in the stock, is the foundry. And right now, it’s an empty stage.
The World's Most Expensive Startup
When you strip away the political narrative and the stock market euphoria, what remains is a company in a deeply transitional state. Intel is effectively operating a startup—Intel Foundry—funded by its legacy businesses and a historic government investment. The market is valuing this "startup" as if its success is a foregone conclusion. The numbers tell us it has yet to land its first customer. The current profit is a testament to financial discipline and restructuring, not a breakthrough in its core strategic mission. The government's bet may yet pay off for national security, but for investors, buying Intel at these levels isn't an investment in a proven tech giant; it's a venture capital play on a company that still has everything to prove.
