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Intel’s third-quarter profit was better than expected, but due to weak PC purchasing sentiment, rising memory prices and an accident at an Israeli factory, the fourth-quarter outlook was worse than the market expected, and its share price fell 21% after the bell.
intel Third-quarter profit beat expectations, but PC demand weakened,israel Factory accidents hit supplies and the outlook for the quarter was weaker than expected. The share price fell 21% after the market closed. The AI craze has boosted server chips, but it has also driven up memory prices and stifled PC buying sentiment. The recovery still faces challenges, with the need to expand investment next year.
Intel announced on the 29th that its third quarter revenue was US$16.5 billion, which was broadly in line with market expectations. Adjusted net earnings per share rose to US$0.52 from US$0.23 in the same period last year, which was better than analysts’ estimate of US$0.41. Net profit was US$3.3 billion, and adjusted net profit was US$2.8 billion.
However, revenue estimates for the fourth quarter are only US$15 billion to US$16 billion, about US$17 billion less than market expectations. Adjusted net earnings per share are estimated at US$0.25, which is also below market expectations of more than US$0.4. Gross profit margin is expected to fall from 43% to below 40% in the third quarter.
AI drives server demand, drives up memory prices but drags PCs down
The impact of AI on Intel has both advantages and disadvantages. The growing popularity of AI agents capable of performing digital tasks autonomously has increased the demand for central processing units (CPUs) in data centers. Intel increased shipments and raised prices, leading to revenue from its data center and AI business rising 78% to US$7.3 billion in the third quarter.
However, the construction of data centers has also increased the tight supply of memory and driven up the cost of PC components. As a result, computer makers raised prices and reduced shipments, resulting in a decline in Intel’s PC chip sales. Revenue from the client business, which covers PC products, fell 5% year-on-year to US$8.1 billion, accounting for nearly half of total revenue.
Intel Chief Financial Officer David Zinsner said the PC market has weakened significantly since the end of August. “We believe the reason for this is memory prices.”
Chief Executive Officer Chen Liwu also said: “Memory prices have increased too much. I predict that this will be a serious problem for all of us in 2027. Not just us, the entire market will be affected.”
Intel expects the PC market slowdown to continue at least through the first half of 2027 and that the market size could shrink by as much as 10% for the full year. This year it is expected to decrease by 12 percent. Counterpoint Research data shows that global PC shipments declined by 21% in the third quarter of this year.
Accidents at an Israeli factory led to a US$300 million decline in revenue for two consecutive quarters.
Supply issues also prevent Intel from fully understanding AI demand. This month, an explosion and fire occurred at an Israeli wafer factory, killing two workers. Production was disrupted for about two weeks and some wafers had to be scrapped.
Zinsner said the factory is expected to resume operations in the next few days, but it takes about three months from silicon wafer to finished product. The crash will reduce revenue by about US$300 million in the fourth quarter and is expected to have a similar impact in the first quarter of next year.
Chen Liwu said the data center business might have performed better had it not been for the shortage of some raw materials and the closure of wafer fabs. “I’m a little disappointed that I can’t meet customers’ needs.”
Asa Hiken, senior analyst at eMarketer, believes that although demand for server processors is strong, it is still not enough to overcome Intel’s current problems, especially as the PC industry is still weak. It remains to be seen whether Intel can continue its recovery.
Wafer foundries still incurring losses, revenue from external customers limited
