Intel Shares Plunge After Weak Fourth-Quarter Forecast Exposes PC Market Pressures and Supply Constraints

Intel shares fell sharply in extended trading on Thursday after the chipmaker issued a weaker-than-expected fourth-quarter outlook, warning that softness in the global personal computer market and production disruptions would weigh on near-term performance.

The forecast overshadowed third-quarter results that exceeded Wall Street's expectations, with revenue rising 21% year over year as demand for data center and artificial intelligence infrastructure supported growth.

Intel reported adjusted earnings per share of 52 cents, above analysts' estimates of 40 cents, while revenue reached $16.51 billion, slightly ahead of the $16.5 billion expected by analysts surveyed by LSEG. Revenue increased from $13.7 billion in the same period a year earlier.

However, the company's guidance pointed to a significant slowdown in the current quarter. Intel expects adjusted earnings per share of 25 cents and revenue between $15 billion and $16 billion. Analysts had forecast earnings of 43 cents per share on revenue of approximately $17.1 billion.

The gap between those expectations highlights the pressure facing Intel as it attempts to recover market share in its traditional PC business while expanding its presence in AI computing and advanced chip manufacturing.

Intel finance chief David Zinsner attributed part of the weakness to the broader PC market, which has been affected by rising costs for memory and other components.

"We see the PC slowdown continuing at least through the first half of next year, but we remain optimistic about the opportunities across our broader portfolio," Zinsner said in the earnings release.

"We will continue making disciplined investments in capacity and working capital to increase supply and support future growth."

Intel's third-quarter performance revealed a widening difference between its traditional computing business and its expanding AI-related operations.

Revenue from its client computing and physical AI group declined 5% from a year earlier to $8.1 billion, missing analysts' estimates. By contrast, revenue from its data center and AI business jumped 78% to $7.3 billion, demonstrating the growing contribution of infrastructure spending to the company's financial performance.

The contrasting results underline Intel's exposure to two different market conditions. Its PC business remains vulnerable to weaker consumer and enterprise demand, while its data center operations are benefiting from investment in cloud computing and AI infrastructure.

Counterpoint Research reported that global PC shipments declined 4% year over year in the second quarter, as higher prices for memory and other components increased costs across the supply chain. Intel's warning that the slowdown could continue into the first half of next year suggests that the pressure may persist beyond a single reporting period.

The weakness is significant because PC processors remain a central part of Intel's business. A prolonged decline in shipments, combined with higher component costs, could constrain revenue growth even as demand for server processors and other computing products increases.

Chief Executive Lip-Bu Tan said the company continued to see long-term demand for its products.

"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.

Intel is also positioning its central processing units, or CPUs, to benefit from the development of agentic AI. While large language models and conventional AI workloads have relied heavily on graphics processing units supplied by Nvidia and Advanced Micro Devices, AI agents require CPUs to coordinate tasks, manage data and execute instructions across computing systems.

Applications such as Meta's Muse and OpenAI's Dots illustrate the growing interest in systems capable of carrying out multi-step tasks rather than simply responding to prompts. As these applications become more widely deployed, demand for server CPUs could expand alongside GPU requirements.

However, Intel's latest results do not yet establish that agentic AI demand can fully offset weakness in its PC business. The company's data center growth is encouraging, but the fourth-quarter forecast indicates that the transition is not producing uniform gains across its operations.

Israel Factory Explosion Adds to Production Challenges

Intel's outlook also incorporates the financial impact of an explosion at a semiconductor fabrication facility in Israel earlier this month. The incident killed two workers and seriously injured a third, disrupting production at the site.

Zinsner told Reuters that the incident would cost Intel approximately $600 million in lost revenue over two quarters. He said the company planned to begin ramping up production at the facility by the end of the week.

The disruption adds another constraint to a business already dealing with shortages of critical semiconductor manufacturing components. Zinsner said in August that substrates, which are essential to chip packaging and production, were also facing significant supply limitations.

These constraints come with heavy impacts because demand for advanced processors does not automatically translate into sales when manufacturers cannot secure the materials and production capacity required to meet orders. Intel's ability to restore output in Israel and manage component availability will therefore influence how quickly it can convert demand into revenue.

The company's share price has gained approximately 150% this year, although it fell about 23% in October as investors reassessed the scale and sustainability of the artificial intelligence investment boom. The latest forecast raises questions about how much of Intel's expected recovery is already reflected in its valuation.

The results also arrive ahead of earnings from major competitors. Nvidia, the world's most valuable company by market capitalization, is scheduled to report results in mid-November, while AMD is due to release its earnings next week. Their results could provide further evidence of the strength of demand for AI processors and data center infrastructure.

Foundry Recovery Remains Central to Intel's Long-Term Strategy

Beyond its processor business, Intel faces a more difficult challenge in rebuilding its semiconductor manufacturing operations.

The company is the only US-based manufacturer of advanced logic chips and has begun high-volume production of its 18A process technology at its new fabrication facility in Arizona. The development gives the United States another domestic source of advanced chip manufacturing alongside Taiwan Semiconductor Manufacturing Company, which dominates the global contract chipmaking industry.

Intel's foundry ambitions, however, depend on attracting major external customers willing to manufacture their processors using its production technology. Intel remains the principal customer for its 18A process, while analysts are watching whether a large fabless semiconductor company will commit to the next-generation 14A technology.

Securing such a customer would be important for the economics of Intel's foundry business. Advanced fabrication plants require substantial upfront investment, and their profitability depends on maintaining high utilization rates and securing enough external orders to spread fixed costs across production volumes.

TechInsights analyst Dan Hutcheson said companies were interested in having an alternative to TSMC.

"People want a second source to be able to twist TSMC's arm and keep them honest on pricing," Hutcheson said. "All the big ones have been testing there."

That interest does not necessarily translate into long-term manufacturing commitments. Potential customers must assess Intel's production yields, technology performance, delivery reliability and cost competitiveness before shifting significant volumes away from established suppliers.

Intel's investment programme has also become more cautious under Tan, who replaced Pat Gelsinger after the latter launched an ambitious effort to rebuild the company's manufacturing leadership. The shift reflects the financial risks of expanding fabrication capacity before securing sufficient customer demand.

Last week, Intel said construction crews had installed the first structural truss at its large Ohio chip fabrication project, which was originally expected to begin delivering chips in 2025. Its next Arizona fabrication facility is expected to start operations by the end of 2028.

The company has received substantial external financial support. The Trump administration took a 10% stake in Intel last year after the chipmaker fell behind in its 7-nanometre and 10-nanometre technology development. Nvidia and SoftBank also invested billions of dollars in the company last year. Intel completed a $23 billion equity offering in August, providing additional capital as it pursues its manufacturing and technology plans.

Commercial partnerships are also developing. Oracle disclosed an expanded arrangement with Intel this week, saying at its annual AI conference that it would deploy the chipmaker's next-generation Xeon server processors. Oracle also plans to use the latest rack-scale systems from Nvidia and AMD as it expands its data center capacity.

The partnership gives Intel another route to participate in the infrastructure spending supporting AI adoption, although the inclusion of competing processors in Oracle's deployment illustrates the competitive environment in which Intel operates.