Intel stock drops 20% after forecasting weak Q4 results amid PC market slowdown

Intel shares fell 20% in extended trading on Thursday after the company issued a weak fourth-quarter forecast, citing continued softness in the global PC market.

For the current quarter, Intel said it expects adjusted earnings per share of 25 cents on revenue between $15 billion and $16 billion. Analysts were expecting revenue of $17.1 billion and EPS of 43 cents, according to LSEG.

In the third quarter, revenue climbed 21% from $13.7 billion a year earlier, the company said in a press release. However, revenue in Intel's client computing and physical AI group fell 5% from the same quarter a year ago to $8.1 billion, missing estimates, even as data center and AI revenue jumped 78% to $7.3 billion.

Global PC shipments declined 4% in the second quarter from a year earlier due to soaring costs for memory and other components, according to Counterpoint Research.

"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," said Intel finance chief David Zinsner, in the release. "We will continue making disciplined investments in capacity and working capital to increase supply and support future growth."

Intel's stock has been on an upward tear, up about 150% so far this year, although it's down roughly 23% in October as concerns have emerged about the size of the artificial intelligence buildout.

Known best for its industry leading central processing units, or CPUs, Intel has been a beneficiary of the rise in agentic AI. While chatbots and large models rely heavily on graphics processors from Nvidia and Advanced Micro Devices, agentic applications such as Meta's Muse and OpenAI's Dots lean on CPUs to help orchestrate tasks and data from a computer operating in the cloud.

"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," CEO Lip-Bu Tan said in the press release.

Intel's foundry business, meanwhile, has struggled to find its footing. Intel is the only U.S.-based manufacturer of advanced logic chips, and is now in high-volume production of its most advanced 18A chip out of its new fab in Arizona, providing an alternative to Taiwan Semiconductor Manufacturing Co.

While Intel remains the only major customer of the chip, analysts say a major fabless chip customer could choose Intel with its next chip, 14A. "People want a second source to be able to twist TSMC's arm and keep them honest on pricing," said TechInsights analyst Dan Hutcheson. "All the big ones have been testing there."

The Trump administration took a 10% stake in the Intel last year after the company had fallen behind on its 7- and 10-nanometer technologies. Nvidia and Softbank also invested billions in Intel last year.

Tan has taken a more cautious approach to foundry spending than his predecessor, Pat Gelsinger, who launched an ambitious revival of the company's foundry business.

Last week, Intel said crews have installed the first structural truss at its huge Ohio chip fab that was originally expected to deliver chips in 2025. Its next fab in Arizona is expected to begin operations by the end of 2028.

Oracle disclosed an expanded deal with Intel this week, announcing at its annual AI conference that it would deploy the chipmaker's next-generation Xeon server processors, as well as the latest rack-scale systems from Nvidia and AMD, as it continues to add data center capacity.

Intel completed a $23 billion equity offering in August. Tech giants have spent trillions of dollars in recent years to meet insatiable demand for AI and the infrastructure needed to support it.

Source: CNBC