Intel Corporation (NASDAQ: INTC) on Thursday forecast fourth-quarter revenue below analyst estimates, as a slump in personal computer demand and a factory shutdown in Israel outweighed data center sales growth that the Santa Clara, California-based chipmaker called its strongest in 15 years.
Intel expects fourth-quarter revenue of $15 billion to $16 billion, below the $17.07 billion analysts had expected, according to LSEG data. It forecast adjusted earnings of 25 cents per share, compared with the 43 cents analysts had expected.
The outlook contrasts with third-quarter results that topped forecasts. Adjusted earnings of 52 cents per share beat the 41 cents analysts had expected, while revenue rose 21% to $16.5 billion, in line with estimates. Intel shares fell about 25% in premarket trading on Friday.
"I am a bit disappointed in terms of how we cannot fulfill the customer requirements," Chief Executive Officer Lip-Bu Tan told Bloomberg News in an interview, referring to supply shortages that he said held back the company's data center business.
#Data Center Sales Rise 78% While PC Chip Revenue Falls 5%
Revenue in Intel's Data Center and AI unit rose 78% to $7.3 billion. The Client Computing and Physical AI Group, which makes chips for laptops and desktops, reported a 5% decline to $8.1 billion.
Intel Foundry, which manufactures chips for Intel's own product units and outside customers, posted revenue of $6.7 billion, up 58% from a year earlier. The unit reported an operating loss of $1.85 billion, narrower than the $2.32 billion loss a year earlier.
Gross margin widened to 43% from 38.2% a year earlier. Net income attributable to Intel fell 18% to $3.3 billion, as the year-earlier quarter included a gain from the sale of a majority stake in Altera. The company generated $5.1 billion in cash from operations.
Intel designs and makes processors for PCs and servers and also builds chips for other companies. It competes with Advanced Micro Devices in PC and server chips, while its foundry unit competes in a market led by Taiwan Semiconductor Manufacturing Co.
#Intel Fourth-Quarter Forecast Reflects Israel Factory Shutdown
An October explosion that shut Intel's factory in Kiryat Gat, Israel, will cut about $300 million from fourth-quarter revenue, Chief Financial Officer David Zinsner said. He said Intel expects a similar shortfall in the first quarter of 2027.
Zinsner told Reuters in an interview that the shutdown would also reduce fourth-quarter gross margin by about 200 basis points. Intel forecast an adjusted gross margin of 38% for the quarter, down from 44.1% in the third quarter.
The plant is expected to resume production within days, Zinsner said. Chips take about three months to move from raw silicon wafers to finished products, which means lost output takes time to recover.
Intel projects the PC market will shrink 12% in 2026 and a further 10% in 2027, with the slowdown lasting at least through the first half of next year. Tan said rising memory chip prices are one of the main challenges facing PC makers.
"Memory pricing went up a lot," Tan said in the interview. "I think my prediction is that in 2027 it is going to be a very severe issue to all of us."
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#Intel Plans Higher Capital Spending in 2027 After About $20 Billion This Year
Intel executives said spending on new plants and equipment will be about $20 billion in 2026 and will rise significantly in 2027, as the company works to expand output, particularly for data center chips.
Zinsner told analysts on a conference call that 2027 will be a year of heavy investment, and that Intel will likely not generate free cash flow during that period.
Intel completed a $23 billion public share offering during the quarter and ended it with $21.8 billion in cash and cash equivalents. It also announced a multiyear deal with Oracle to expand use of its Xeon server processors on Oracle's cloud, and plans to acquire quantum software company Classiq.
Zinsner said in the earnings release that Intel sees the PC slowdown continuing at least through the first half of next year, while the company keeps investing in capacity to increase supply. Memory shortages, the pace of recovery at the Israel factory and the cost of its expansion plans remain key risks to that outlook.