Intel (INTC) shares plunged more than 20% in extended trading on Thursday, Oct. 29, after the chipmaker issued a disappointing fourth-quarter forecast and warned that a slowdown in the PC market could continue into 2027.
The selloff came despite better-than-expected third-quarter earnings, as strong demand for data center processors helped offset weakness in Intel’s PC business.
Investors were also concerned about the company’s spending plans. Intel expects capital expenditures to rise sharply next year and warned that it would not generate positive cash flow in 2027.
Intel has spent years trying to catch up with rivals after falling behind in advanced chipmaking.
The company remains the only U.S.-based manufacturer of leading-edge logic chips, making its recovery important to Washington’s push to bring more semiconductor production back to the U.S.
The Trump administration took a 10% stake in Intel last year. Nvidia (NVDA) and SoftBank (SFTBY) also poured billions of dollars into the struggling chipmaker.
Those investments have helped fuel optimism about Intel’s recovery. Its shares had surged roughly 150% this year before Thursday’s earnings report, although the stock had fallen about 20% over the last month amid broader concerns about AI infrastructure spending.
Intel beats Q3 estimates but PC weakness clouds outlook
Intel reported third-quarter adjusted earnings of 52 cents per share, above analysts’ expectations of 40 cents, according to LSEG data pulled by CNBC.
Revenue rose 21% year over year to $16.51 billion, slightly beating Wall Street’s estimate of $16.5 billion.
But the company’s two major businesses told different stories.
Revenue in its client computing and physical AI group fell 5% from a year earlier to $8.1 billion, missing estimates as higher memory prices weighed on PC demand.
Meanwhile, data center and AI revenue jumped 78% to $7.3 billion, reflecting growing demand for server processors.
The weakness in PCs is expected to continue.
For the fourth quarter, Intel forecast adjusted earnings of 25 cents per share on revenue between $15 billion and $16 billion, well below analysts’ expectations of 43 cents per share and $17.1 billion in revenue.
The disappointing forecast reflects broader challenges in the PC industry, where rising costs for memory and other components have pressured manufacturers.
Intel said the pace of the PC market correction has accelerated over the past two months, with manufacturers aggressively managing inventories.
“We see the PC slowdown continuing at least through the first half of next year,” Intel finance chief David Zinsner said in the earnings release.
“We will continue making disciplined investments in capacity and working capital to increase supply and support future growth.”
Management said the next several quarters would remain challenging and that it was “not optimistic” about memory conditions in 2027.
Adding to those pressures, Intel is dealing with the fallout from an explosion at its manufacturing facility in Israel earlier this month that killed two workers and seriously injured another. The incident forced an extended shutdown, disrupting production and shipments of 10-nanometer chips.
Intel expects the disruption to reduce revenue by about $600 million over two quarters, including roughly $300 million in the fourth quarter.
Intel sees 2027 as growth year as AI boosts server demand
While the PC business remains under pressure, Intel sees a more promising outlook for its data center operations.
Management described 2027 as a “growth year” during the earnings call, although it expects the first half to remain “a bit constrained.”
Executives said they were “very optimistic” about the data center business as customer demand signals continue to strengthen, especially with the growing use of agentic AI.
Unlike traditional AI workloads that rely heavily on graphics processing units from Nvidia and Advanced Micro Devices (AMD), agentic AI also requires CPUs to coordinate tasks, manage data and run applications.
That trend could provide a longer-term boost to Intel’s Xeon server processors.
“Despite near-term headwinds affecting the broader PC industry, we continue to see robust demand for CPUs and, more broadly, for all our computing platforms in the long term,” Tan said in a statement.
But strong demand does not mean Intel has enough supply.
Tan said he was “disappointed that we were not able to meet strong customer demand in this quarter.”
“Our Q3 results demonstrate improving execution, meaningful progress expanding supply and continued advancement of our process technology,” Tan said.
“Despite near-term headwinds across the PC industry, demand for our CPUs remains robust, reinforcing our confidence in the long-term growth opportunities for our business. Our immediate priority is to unlock additional supply.”
Intel plans to increase manufacturing investment to address the supply shortage.
The company reaffirmed its 2026 capital expenditure outlook of $20 billion but said spending would rise “up strongly” in 2027.
Management described next year as an “investment year” and warned that Intel would not generate positive cash flow.
The company nevertheless expects to pay down debt in 2027 and remains “confident” in its long-term profitability.
Zinsner said Intel would remain cautious about spending despite the need for additional capacity.
“We will remain disciplined as we invest, and we will not spend $1 of capital unless we have confidence in the health of our products and process technologies, and clear evidence of customer demand,” he said on the call.
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