Intel shares plunged 20% on Thursday after the chipmaker forecast fourth-quarter revenue and earnings well below Wall Street expectations, overshadowing stronger-than-expected third-quarter profits and surging demand for data-centre processors.
The company expects fourth-quarter revenue of between $15 billion and $16 billion, below analysts’ forecast of $17.08 billion. Adjusted earnings are projected to reach $0.25 per share, significantly lower than the consensus estimate of $0.44.
The outlook contrasts with Intel’s third-quarter performance, which exceeded analysts’ expectations. The company reported adjusted earnings of $0.52 per share, beating the forecast of $0.40, while revenue rose 21% year on year to $16.5 billion, slightly above the $16.48 billion expected.
Intel faces contrasting trends across its businesses, as robust demand for server central processing units (CPUs) helps offset weakness in the personal computer (PC) market.
“Despite near-term headwinds across the PC industry, demand for our CPUs remains robust,” chief executive Lip-Bu Tan said, attributing the results to improving execution, expanded supply and progress in process technology.
Chief financial officer David Zinsner warned that weakness in the PC market was expected to continue through at least the first half of next year.
Intel’s Client Computing and Physical AI Group recorded a 5% year-on-year decline in third-quarter revenue to $8.1 billion, reflecting the industry slowdown.
However, revenue from its Data Centre and AI segment surged 78% to $7.3 billion, marking the strongest data-centre revenue growth in 15 years, according to Zinsner.
The company’s profitability outlook also disappointed investors. Intel’s adjusted gross margin improved to 44.1% in the third quarter, up from 40% a year earlier, but it expects the figure to fall to 38% in the fourth quarter.
Meanwhile, Intel Foundry revenue increased 58% year on year to $6.7 billion. The company also generated $5.1 billion in operating cash flow during the quarter.
Investors are continuing to assess whether Intel’s manufacturing business can attract sufficient external customers to support its long-term investment plans.
Further updates on foundry customer commitments, manufacturing capacity and the company’s next-generation process roadmap are expected to provide additional insight into its turnaround when management discusses the results on its earnings call.
