Intel's weak fourth-quarter guidance sends shares plunging 20% after hours, blamed on PC market slowdown

Chip giant Intel reported its fiscal 2026 third-quarter results after the bell on Thursday (the 29th), with revenue only slightly above expectations and weak fourth-quarter guidance, and noted that the global PC market remains sluggish, sending its shares down 20% in after-hours trading.

Intel said in a press release that third-quarter revenue rose 21% from $13.7 billion a year earlier.

Key third-quarter figures: revenue was $16.51 billion, slightly above the LSEG estimate of $16.5 billion; adjusted EPS was 52 cents, above the estimated 40 cents.

However, revenue at Intel's Client Computing and Physical AI segment fell to $8.1 billion, down 5% from a year earlier and below market expectations, even as data center and AI revenue jumped 78% to $7.3 billion.

According to Counterpoint Research, global PC shipments fell 4% year over year in the second quarter, hit by surging costs for memory and other components.

Looking ahead to the current quarter (the fourth quarter), Intel forecasts adjusted EPS of 25 cents and revenue of $15 billion to $16 billion, below LSEG analysts' expectations of $17.1 billion in revenue and 43 cents per share.

"We expect the PC market slowdown to persist at least through the first half of next year, but we remain optimistic about the opportunities across our broader product portfolio," CFO David Zinsner said in the press release. "We will continue to invest with discipline in capacity and working capital to increase supply and support future growth."

Intel's guidance also reflects the impact of an explosion at a wafer fab in Israel earlier this month that killed two workers and seriously injured another. Zinsner told Reuters the incident is expected to cost the company about $600 million in revenue over two quarters. He also said the company plans to begin gradually ramping production at the fab before the end of this weekend.

Intel shares have risen sharply this year, up about 150% year to date, but have fallen about 23% since October as doubts about the scale of AI infrastructure buildouts have emerged.

"We will continue to invest prudently," Zinsner said on the conference call. "We will not spend a single dollar of capital expenditure unless we are confident in the maturity of our products and process technology and have clear evidence that customer demand exists."

Intel, known for its industry-leading central processing units (CPUs), has also become a beneficiary of the rise of agentic AI. Chatbots and large models rely heavily on GPUs from Nvidia and AMD, but agentic AI applications such as Meta's Muse and OpenAI's Dots rely on CPUs to help coordinate tasks and data in cloud computing systems.

"Despite the near-term headwinds facing the PC industry as a whole, we continue to see strong CPU demand, and over the long term demand across all of the company's computing platforms is quite solid," CEO Lip-Bu Tan said in the press release.

Meanwhile, Intel's foundry business is still struggling to find a stable direction. Intel is the only company headquartered in the U.S. capable of manufacturing advanced logic chips, and it is now mass-producing its most advanced 18A process chips at a new fab in Arizona, offering an alternative to TSMC.

Although Intel remains the only major customer for chips on this process so far, analysts say large fabless chip customers may choose Intel for the next-generation 14A process.

"Players want a second source of supply to put pressure on TSMC and keep its pricing in check. All the major players have already been testing locally," said TechInsights analyst Dan Hutcheson.

In addition to the memory shortage, substrates, another key component in chip manufacturing, are also facing severe supply constraints. Zinsner said in August that substrate supply was "really very tight."

The Trump administration took a 10% stake in Intel last year. Previously, Intel had fallen behind rivals in 7nm and 10nm process technology. Nvidia and Japan's SoftBank also invested billions of dollars in Intel last year.

Compared with former CEO Pat Gelsinger's ambitious plan to aggressively revive the foundry business, Tan has taken a more cautious approach to foundry spending.

Intel said last week that its engineering team had installed the first truss at its large Ohio fab. The plant had originally been expected to begin delivering chips in 2025. Intel's next fab in Arizona is expected to begin operations at the end of 2028.

Oracle also announced this week that it is expanding its partnership with Intel. At its annual AI conference, Oracle said it will deploy Intel's next-generation Xeon server processors, as well as the latest rack-scale systems from Nvidia and AMD, to continue expanding data center capacity.

Intel completed a $23 billion stock offering in August. In recent years, tech giants have invested trillions of dollars to meet seemingly endless market demand for AI and related infrastructure.