Intel's Q4 guidance falls far short of expectations, shares drop over 20% after hours

Intel's fourth-quarter guidance came in far below Wall Street expectations, sending its shares plunging more than 20% in after-hours trading. Three pressures—an explosion at its Israeli plant, continued weakness in the PC market, and a memory chip shortage—struck simultaneously, putting the chip giant's recovery narrative to a severe test.

Intel released its earnings on Thursday, forecasting fourth-quarter revenue of $15 billion to $16 billion, compared with an average analyst estimate of $17 billion compiled by Bloomberg, with some forecasts exceeding $18 billion. Adjusted earnings per share are expected to be just 25 cents, far below the 43 to 45 cents widely expected on Wall Street.

Third-quarter results themselves were decent: revenue rose 21% year over year to $16.5 billion, broadly in line with expectations; adjusted earnings per share of 52 cents beat analysts' expectations of 41 cents.

However, the strong quarterly figures failed to offset the shock from the weak outlook, and after the news was released, Intel's shares fell more than 22% at one point in after-hours trading.

Explosion at Israeli plant: about $300 million in quarterly revenue lost

One important factor behind the setback to Intel's fourth-quarter guidance is the explosion at its plant in Kiryat Gat, Israel. The accident occurred in October, killed two employees and disrupted production.

According to Reuters, Chief Financial Officer David Zinsner said in an interview that the explosion is expected to reduce Intel's fourth-quarter revenue by about $300 million and lower gross margin by about 200 basis points.

The plant was shut down for about two weeks as a result, and the company is currently assessing the usability of the damaged wafers. "We're still going through which wafers can be used and which can't, so we need to see whether the impact will last longer," Zinsner said.

He expects a similar revenue impact to continue into the first quarter of next year.

The plant mainly uses Intel's 10-nanometer process to produce data center chips. Zinsner said the company plans to restart the plant's production ramp by the end of this weekend.

PC market contraction extends to 2027, memory shortage becomes core pain point

Beyond the plant accident, the continued slump in the PC market poses a deeper structural challenge. Intel's third-quarter client business (i.e., PC chips) revenue fell 5% year over year to $8.1 billion, below analysts' expectations of $8.98 billion.

Intel expects PC market weakness to last at least through the first half of 2027, with the market shrinking 12% in 2026 and a further 10% in 2027.

CEO Lip-Bu Tan listed rising memory prices as the top challenge facing the PC market. "My prediction is that in 2027 this will become a severe problem for everyone, not just us—the entire market will be affected," Tan said.

The surge in AI server demand has driven up consumption of DRAM memory chips, leading to shortages and steadily rising prices for products from memory makers such as Samsung, SK Hynix and Micron, which in turn pushes up the retail prices of notebooks and desktops, suppresses end-consumer demand, and indirectly weakens shipments of Intel's PC processors.

Data center business grows strongly, supply bottlenecks limit upside

Nevertheless, Intel's data center and AI business still recorded strong growth, with third-quarter revenue up 78% year over year to $7.3 billion, becoming an important support for overall results.

However, Tan admitted he was "somewhat disappointed" that the company failed to fully meet customer demand. He noted that without the drag from the Israeli plant shutdown and shortages of some raw materials, the data center business could have performed even better. "I'm somewhat disappointed that we can't meet customer demand," Tan said in an interview.

Intel's overall gross margin in the third quarter was 43%, but the company expects fourth-quarter gross margin to narrow to 38%, with the Israeli plant accident being one of the main sources of pressure.

Foundry expansion strategy continues, full-year capex raised

Faced with the above pressures, Intel is still maintaining an expansionary tone on capital expenditure. The company has raised its 2026 capital expenditure forecast to $20 billion from $18 billion in July this year, and said spending will "increase significantly" further in 2027 to expand manufacturing capacity.

In August this year, Intel raised $23 billion through a stock offering to fund the expansion of its foundry business.

Intel's foundry division third-quarter revenue rose 58% year over year to $6.7 billion. The division is opening its foundry business to external customers, competing directly with TSMC. Tan said the company is increasingly confident in its ability to attract external chipmakers to use its plants.

CFO Zinsner also said the company will "continue to make disciplined capacity investments to increase supply and support future growth."

Recovery path still uncertain, market confidence faces test

Since Lip-Bu Tan took over Intel in March 2025, the company has improved its financial position, cut redundant positions and brought in major external investors including Nvidia and the U.S. government. The stock has at one point risen more than 150% this year, reflecting market expectations that Intel will become a key beneficiary of AI.

However, the guidance miss has dealt a blow to that expectation. Intel continues to lose market share to AMD in PC and server chips, and is finding it hard to challenge Nvidia's dominance in the lucrative AI accelerator chip market.

Although the company remains optimistic about product demand in the long term and is increasing investment in new equipment to boost capacity, Intel's recovery still faces many uncertainties before its technological leadership is fully restored and its foundry business is validated by major customers. Risk disclosure and disclaimer

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