Thanks, Brian, and good afternoon. This was an excellent quarter for Intel. Versus the expectations we set out at the beginning of the quarter, our revenue is better, our gross margins were stronger, and our spending was lower. As Brian said, we're on track for another record in 2017. Revenue in the quarter was $16.1 billion, up 6% year over year excluding McAfee, and we achieved record earnings. Operating income was $5.6 billion, up 8% year over year, and EPS was $1.01, up 26% year over year. From a capital allocation perspective, we closed the Mobileye transaction and funded a significant portion of the purchase price through the sale of non-core assets, including reducing our position in ASML and proceeds from the partial exit of McAfee. Additionally, we signed long-term NAND supply agreements, providing more than $2 billion in prepayments through 2018, significantly improving free cash flow for our memory business. We generated $6.3 billion in cash flow from operations, and we returned $2.4 billion to shareholders. At our Analyst Day in February, we talked about our strategy to transform from a PC-centric company to a data-centric company. Our Q3 results demonstrated continued momentum in our transformation. Intel's data-centric businesses, those outside of the PC segment, grew 15% year over year and now represent 45% of our revenue, up from approximately 30% in 2012. This collection of businesses is well positioned to capitalize on industry trends, create great value for our customers, and represents the company's growth engine going forward. Our PC-centric businesses generated flat revenue in the quarter and improved operating margin by over 3 points. The CCG team continues to execute extremely well in a declining PC TAM environment. Our focus on performance-leading products and a smart segmentation strategy is working. This business provides scale, funds IP, and generates a significant portion of the company's profits and cash flows.
Moving to earnings, we generated significant EPS expansion in the quarter, up 26% year on year. Our EPS improvement was driven by solid platform execution, strong growth from our adjacent products and businesses, and lower spending, resulting in $408 million growth in operating income. Additionally, we continued to monetize some of our ICAP [Intel Channel Alliance Program] portfolio positions, resulting in a gain of $0.13 per share. We made a commitment at the beginning of the year to reduce spending to 30% of revenue by 2020 at the latest while continuing to invest in key growth areas and capabilities. We are making great progress. Total spending was down 6% year over year in the third quarter, with continued investments in our key priorities, including driving Moore's Law forward, artificial intelligence, and autonomous driving. At the same time, we're executing with operational discipline and generating significant leverage from higher revenue growth. Our R&D spending as a percent of revenue was flat and our SG&A costs were down 3 points as we rationalize our marketing and sales programs and generate significant leverage in our G&A functions. In addition, we've made changes to our co-marketing programs to provide more flexibility and efficiency to our customers. These changes resulted in a reduction in revenue of approximately $200 million during the quarter, reducing year-over-year growth in CCG by approximately 2 points and DCG by just over 0.5 point, with a corresponding reduction in spending. These changes collectively have no impact on operating income. The impact of these changes will continue into Q4 at a slightly increased level. On a full-year basis, we expect direct spending to be approximately 33%, one point better than our prior guidance and down over two full points from last year. Let me touch briefly on our segment performance on slide 5. The Client Computing Group had another outstanding quarter.
Revenue of $8.9 billion was flat year over year, and operating margins grew by 3 points. Flat revenue was driven by client ASPs up 7%, unit volume down 7%, and our adjacency business up 15%, partially offset by the changes to our co-marketing programs. We saw typical Q3 inventory build ahead of the holiday season, and we believe the worldwide PC supply chain is operating at healthy levels. This segment had another quarter of significant profit growth, with operating income growing 8% from strong Core mix, continued improvement in 14-nanometer unit costs, and lower spending. The Data Center Group had revenue of $4.9 billion, up 7% year over year, and operating income of $2.3 billion grew 7%. Q3 operating margin was 46%. As Brian mentioned earlier, we had strong growth in both the comms and cloud service provider segments, which are nearly 60% of our DCG revenue. Overall unit volume was up 4%, ASPs were up 2%, and adjacencies grew 16%. We launched Purley in Q3, and in less than three months we've had more than 200 OEM systems begin production shipments. Revenue scale from leadership products and spending leverage and efficiency drove strong operating income growth for the business. We expect DCG to meet our full-year expectations of high single-digit growth and operating margin percent in the low 40%.
The IoT, NSG, and PSG business segments are becoming a larger component of our overall business, growing 25% year over year. Our Internet of Things business achieved record revenue of $849 million, up 23% year over year, driven by strength in industrial and video and continued momentum in our retail business. Operating profit was $146 million, down 24% year over year, from continued investments in the automotive segment.
We closed the Mobileye transaction in early August, four months sooner than we expected. The Mobileye team executed extremely well in the third quarter and exceeded our expectations, with $82 million in revenue and $39 million in operating income. Going forward, results for the Mobileye acquisition will be included in our All Other segment. Increases in spending in this segment will correspond with reductions in the IoTG segment as we realize cost synergies from this acquisition. Our memory business had record revenue of $891 million, up 37% year over year, with strong demand from data center SSD solutions and demand signals outpacing supply. This segment had an operating loss of $52 million, an improvement of $82 million versus last year.
Our memory fab in Dalian continues to make great progress. Yields continue to improve, and unit costs are well ahead of expectations. The core NAND business continues to be profitable, and we expect the memory business as a whole to be profitable in 2018, both ahead of our prior estimates.
The Programmable Solutions Group had revenue of $469 million, up 10% year over year, driven by strength in advanced products, data center, automotive, and military. Operating profit was $113 million, up 45% year over year. We're making good progress in realizing cost synergies with the integration of this business. Moving to slide 8, our cash position of $17.5 billion at September 30 is basically unchanged from the beginning of the year, but we've had lots of moving pieces during the year.
First, we have generated $7.2 billion in free cash flow year-to-date, and we've returned $7.4 billion to shareholders through the form of dividends of $3.8 billion and share repurchases of $3.6 billion, including $1.3 billion and $1.1 billion respectively in the quarter. Second, as we mentioned earlier, we closed Mobileye in the third quarter for $14.5 billion in cash and funded over 50% of the purchase price from the sale of non-core assets during the year, including McAfee and the sale of ASML shares. Earlier in the year, we received $924 million from the sale of 51% stake in McAfee. And in the quarter, McAfee repaid the promissory notes of $2.2 billion and issued a dividend of $735 million. Third, we expect to generate $1.5 billion to $2 billion more free cash flow versus where we were at the beginning of the year. The additional free cash flow was driven by higher earnings, lower CapEx, customer prepayments on supply agreements, partially offset by increases to working capital associated with stronger growth and NSG and modem momentum. Based on these factors, we're raising our full-year revenue guidance by $700 million to $62 billion, operating income guidance by $900 million to $18.8 billion, and EPS guidance by $0.25 to $3.25 per share.
The improvement in revenue outlook is primarily driven by higher expectations of the PC business and continued momentum in memory. The improvement in operating margin is primarily driven by our increased revenue outlook and lower spending. The increase in EPS is driven by higher expectations of revenue coupled with gains on the sale of our equity investments. And on slide 11, as we look to the fourth quarter of 2017, we are forecasting the midpoint of the revenue range at $16.3 billion, up 3% year over year excluding McAfee. We expect operating income of $5.2 billion with gross margins flat year over year and spending, as a percentage of revenue, to be down approximately 2 points. We expect EPS of $0.86, driven by operating margin expansion and higher revenue. 2017 is shaping up to be a record year for Intel. We feel great about where we are nine months into our three-year transformation. Since January, we have raised our revenue outlook by $2.5 billion, our operating income by $1.7 billion, and our EPS by $0.45.
At the same time, we are investing to compete and win in an expanded market. Our PC-centric team continues to operate very well in a down market and our data-centric businesses are up double digits collectively, as we continue to transform the company to power the cloud and smart connected devices. With that, let me turn it back over to Mark.