Intel Shares Fall About 20% After Hours as Q4 Forecast Misses Estimates, Israel Fab Blast Adds $600 Million Hit

Intel posted a quarter that beat on profit, then handed investors a fourth-quarter forecast that wiped out the good news.

The chipmaker reported third-quarter revenue of $16.51 billion, up 21% from a year earlier. Adjusted earnings were 52 cents a share. Analysts polled by LSEG and FactSet had expected roughly 39 to 41 cents.

The guidance is where it came apart. Intel projected fourth-quarter adjusted earnings of 25 cents a share on revenue between $15 billion and $16 billion. Analysts had expected about 43 to 45 cents on $17.1 billion to $17.3 billion, depending on the poll.

The stock reaction

Intel closed Thursday at $92.07, down 3.6%. In extended trading, shares fell as much as 17% to $76.85 in one early print, and later accounts put the drop at 20% to 23%.

The stock had more than doubled this year through the close. It was already down about 23% in October on mounting worry over the size of the AI buildout, according to CNBC.

If the after-hours loss holds into Friday's session, Intel would shed over $80 billion in market value, by Reuters' calculation. Nvidia, Broadcom, AMD, Micron, Qualcomm and Arm shares slid between 1% and 6% in extended trading.

Two businesses, two directions

The data center and AI segment grew 78% to $7.3 billion. CFO David Zinsner called it Intel's strongest data center revenue growth in 15 years.

The client computing group, which sells PC chips, fell 5% to $8.1 billion. That missed estimates of $8.98 billion, according to Reuters.

Zinsner said Intel expects PC revenue to fall in the mid-20% range in the fourth quarter. "We see the PC slowdown continuing at least through the first half of next year," he said.

GAAP profit was $3.32 billion, or 60 cents a share, down from $4.06 billion, or 90 cents, a year earlier. Intel's GAAP forecast for the fourth quarter is 10 cents a share.

The Israel explosion

An explosion at Intel's Kiryat Gat fab earlier this month killed two workers and seriously injured a third. CEO Lip-Bu Tan called it an "unfortunate and tragic accident" that caused an extended shutdown.

The plant largely produces data center chips on Intel's 10-nanometer process. It was shut for about two weeks.

Zinsner said the incident will cost about $600 million in revenue over two quarters. Fourth-quarter revenue falls by roughly $300 million and gross margin by about 200 basis points, he said in an interview with Reuters. He expects a similar revenue hit in the first quarter.

Zinsner said Intel planned to begin ramping production at the site by the end of this week. The company is still sorting out which wafers can be used and sold, and he said any impact could stretch beyond the current estimate.

Memory costs and the PC squeeze

Tan pointed to more than the blast. "We face near-term challenges, including manufacturing supply shortages, the unprecedented memory crunch, and the resulting softness in PC demand," he told analysts.

Counterpoint Research reported that global PC shipments fell 4% in the second quarter from a year earlier, driven by soaring memory and component costs.

Tan said he was "disappointed that we were not able to meet strong customer demand in this quarter."

Management's case versus the capacity question

Intel's leadership argues the fundamentals are sound. "Despite near-term headwinds across the PC industry, demand for our CPUs remains robust," Tan said, adding that the company's immediate priority is unlocking more supply for its Xeon server line to meet "extraordinary demand."

Intel finished a $23 billion public equity offering in August. Tan said the company will deploy the money quickly and that capital spending and component purchase commitments will "increase significantly over the next several quarters."

Hendi Susanto, a portfolio manager at Gabelli Funds, framed the open issue differently. The Israel explosion "brought down Intel's capacity," he said. "The question is whether Intel can build capacity fast enough to capture it."

Zinsner put a limit on the spending. "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.

Other deals in the quarter

Intel also announced plans to acquire Classiq, a quantum software company, to pair with its spin-qubit manufacturing work. It disclosed a multiyear collaboration with Oracle to expand Xeon-based computing on Oracle Cloud Infrastructure. Operating cash flow for the quarter was $5.1 billion.

What comes next

Friday's regular session will show whether the after-hours drop sticks. AMD reports next week, and Nvidia is scheduled to report in mid-November.

The unanswered operational question is the wafers. Intel has not said how many of the Kiryat Gat wafers are salvageable, and Zinsner has said the cost could run past the $600 million figure.