Intel shares tumbled about 25% in Friday premarket trading after the chipmaker warned of weaker PC demand and a costly factory disruption, even as sales of its data-center processors surged. The reaction puts fresh pressure on Intel's turnaround under CEO Lip-Bu Tan.
In its third-quarter, Intel forecast fourth-quarter revenue of $15- $16 billion, down from $16.5 billion in the September quarter.
The PC warning
Intel's client-computing business brought in $8.1 billion in the third quarter, a 5% decline from a year earlier. Rising memory prices and tight corporate IT budgets have made computers more expensive, prompting manufacturers to reduce chip orders and inventory.
The company expects the slowdown to persist at least through the first half of 2027. That matters because PC processors still account for nearly half of Intel's quarterly revenue, so even strong demand elsewhere cannot easily offset a prolonged decline.
The factory setback
Intel's latest SEC filing describes an accident at its Kiryat Gat manufacturing facility in Israel that caused employee casualties and injuries. Production was halted for approximately two weeks, with operations expected to resume by the end of October.
Management estimated a roughly $300 million hit to fourth-quarter revenue from the disruption. On its earnings call, Intel's finance chief indicated a similar revenue effect could reach the first quarter of 2027, bringing the possible two-quarter impact to about $600 million.
The company cautioned that cleanup, inventory losses and reduced production efficiency could affect results into the first half of next year. The full cost remains uncertain.
AI demand is not the problem
Intel's data-center and AI unit grew revenue 78% year over year to $7.3 billion, while its foundry business reported $6.7 billion in revenue, up 58%. Overall third-quarter revenue rose 21%.
But strong AI infrastructure demand has collided with a shortage of packaging substrates, manufacturing constraints and disruption at the Israeli facility. Intel says demand for some server processors is still running ahead of supply.
The next test is whether Intel can expand chip output quickly enough to capture that demand while the PC market weakens. For investors, a booming AI business means less if the factories cannot deliver the chips.
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Sources: Intel Q3 earnings, Intel's Q3 SEC filing, and Nasdaq premarket quotes.