Intel Shares Plunge 25% as Weak Fourth-Quarter Outlook Overshadows Strong Q3 Earnings

Intel (NASDAQ:INTC) shares fell 25% in premarket trading after the semiconductor manufacturer issued fourth-quarter revenue and earnings forecasts significantly below Wall Street expectations, despite reporting stronger-than-anticipated third-quarter results.

The sharp decline reflected investor concerns about weakness in the personal computer market, lower expected profitability and the challenges facing Intel as it works to strengthen its manufacturing operations.

The company reported third-quarter adjusted earnings of $0.52 per share, exceeding analysts’ expectations of $0.40. Revenue increased 21% year over year to $16.5 billion, slightly ahead of the consensus estimate of $16.48 billion.

However, the stronger quarterly performance was overshadowed by guidance indicating a slowdown in the final three months of the year.

Fourth-Quarter Revenue and Earnings Forecasts Miss Expectations

Intel projected fourth-quarter revenue of between $15 billion and $16 billion, considerably below the $17.08 billion anticipated by analysts.

The midpoint of the company’s forecast, at $15.5 billion, represents a shortfall of approximately 9% compared with market expectations.

Intel also expects adjusted earnings of $0.25 per share for the quarter, compared with the consensus forecast of $0.44.

The weaker outlook highlights the contrasting conditions across the company’s main businesses, with strong demand for data-centre processors offset by continued pressure on the PC market.

Chief Executive Lip-Bu Tan acknowledged the challenges facing the industry while emphasising the underlying demand for Intel’s products.

“Despite near-term headwinds across the PC industry, demand for our CPUs remains robust,” Tan said.

He added that the third-quarter results reflected improvements in operational execution, expanded supply availability and progress in the company’s semiconductor manufacturing technology.

PC Market Weakness Expected to Continue Into 2027

Intel’s Client Computing and Physical AI Group reported third-quarter revenue of $8.1 billion, representing a 5% decline from the same period last year.

The decrease reflected weaker conditions across the personal computer industry, which continues to affect demand for client processors.

Chief Financial Officer David Zinsner indicated that the slowdown is expected to persist through at least the first half of 2027.

The outlook suggests that a meaningful recovery in Intel’s PC-related operations may take longer than investors had anticipated.

Analysts at Baird also expressed caution about the company’s prospects in both its client computing and data-centre businesses.

“Client easy comps will not materialize until 2H27, while we continue to model share loss in both segments in 2027,” the analysts said in a note to clients.

Their assessment suggests that easier year-over-year comparisons in the PC business may not emerge until the second half of 2027, while competitive pressures could continue affecting Intel’s market share.

Data Centre Revenue Surges 78% on Strong Processor Demand

Despite the weakness in personal computers, Intel recorded substantial growth in its Data Center and AI division.

Revenue from the segment increased 78% year over year to $7.3 billion in the third quarter.

According to Zinsner, the performance represented Intel’s strongest data-centre revenue growth in 15 years.

The increase reflected robust demand for server CPUs, providing an important source of growth as the company navigates weaker conditions in other areas.

Demand for computing infrastructure has remained a significant factor for semiconductor manufacturers, particularly as businesses expand their data-centre capacity.

However, the strong performance was insufficient to offset concerns about Intel’s fourth-quarter outlook and the possibility of continued competitive pressure.

The contrast between the two divisions illustrates the challenges facing Intel as it attempts to balance growth opportunities in data centres with weaker demand in its traditional PC business.

Gross Margin Outlook Points to Renewed Profitability Pressure

Intel reported an improvement in adjusted gross margin during the third quarter, with the figure increasing to 44.1% from 40% a year earlier.

The expansion indicated stronger profitability during the reported period, supported by the company’s operational performance.

However, Intel expects adjusted gross margin to decline to approximately 38% in the fourth quarter.

The projected decrease represents a significant deterioration from the third-quarter level and adds to concerns about the company’s near-term earnings potential.

Investors are monitoring whether Intel can sustain improvements in manufacturing efficiency and profitability while managing fluctuations in product demand.

The weaker margin forecast contributed to the negative market reaction, despite the company’s better-than-expected third-quarter earnings.

Intel Foundry Revenue Rises 58% as Manufacturing Strategy Remains in Focus

Intel’s manufacturing business also delivered substantial revenue growth during the quarter.

Intel Foundry reported revenue of $6.7 billion, an increase of 58% compared with the previous year.

The company generated $5.1 billion in operating cash flow during the third quarter, providing an additional measure of its financial performance.

Nevertheless, investors remain focused on whether Intel can attract sufficient external manufacturing customers to support its long-term investment programme.

The company’s foundry strategy depends on building a competitive semiconductor manufacturing operation capable of securing commitments from customers beyond Intel’s own product divisions.

Progress in advanced manufacturing processes, capacity expansion and customer agreements will therefore remain important indicators of the company’s turnaround.

Investors Await Further Details on Intel’s Recovery Strategy

Intel’s upcoming earnings call is expected to provide additional information about the company’s manufacturing roadmap, customer commitments and plans to address weaker PC demand.

Investors will be looking for evidence that strong data-centre processor sales can continue supporting revenue while the company works to improve its competitive position.

Updates on next-generation manufacturing processes and foundry capacity could also help clarify the outlook for Intel’s long-term investment strategy.

Although the third-quarter results exceeded expectations, the sharp premarket decline indicates that investors are placing greater emphasis on the weaker fourth-quarter forecasts.

With revenue, adjusted earnings and gross margin all expected to decline from third-quarter levels, Intel faces continued pressure to demonstrate that its operational improvements can translate into sustainable growth and profitability.

Intel stock price