Intel Shares Plunge as Weak Outlook Hits AI Gains
Intel shares plunged in after-hours trading after weak fourth-quarter guidance overshadowed a 78% jump in data center and AI revenue and a strong third quarter.
Intel shares plunged in late trading on Thursday, October 29, 2026, after the chipmaker issued a fourth-quarter forecast far below what Wall Street expected. The selloff came even though Intel's third-quarter results beat profit expectations and its data center and AI business grew at its fastest pace in 15 years. The reaction shows how quickly the mood has changed around chip stocks. Strong demand for AI computing is no longer enough on its own. Investors now want proof that the demand turns into steady profit, and Intel's outlook did not give them that comfort.
What Intel reported
For the three months ended September 26, Intel reported revenue of $16.5 billion, up 21% from a year earlier and in line with analysts' average estimate. Adjusted earnings came in at $0.52 per share, above the $0.41 analysts expected. Net income fell 18% from a year earlier to $3.3 billion, while GAAP earnings were $0.60 per share. Chief financial officer David Zinsner said revenue, gross margin and earnings per share all beat the company's own guidance, including its strongest data center revenue growth in 15 years.
Data center and AI surge 78%
The standout was Intel's Data Center and AI unit, where revenue jumped 78% to $7.3 billion. The company credited robust demand for its Xeon server processors, as cloud providers keep buying chips to run AI services. Intel Foundry, the contract chipmaking business, also grew fast. Revenue rose 58% to $6.7 billion, though the unit still posted an operating loss of about $1.85 billion as Intel spends heavily to build and ramp up its factories. Intel is trying to win outside customers for its factories in a market dominated by Taiwan Semiconductor Manufacturing.
The PC business drags
The problem sits in Intel's traditional business. Its Client Computing and Physical AI group, which makes chips for personal computers, saw revenue fall 5% to $8.1 billion. The PC market is in a deep slump. Global PC shipments fell 21% in the third quarter to 57 million units, according to Counterpoint Research, as a shortage of memory chips pushes up component prices and lifts the cost of laptops and desktops. That has cut into demand for the Intel chips inside those machines. Chief executive Lip-Bu Tan warned that memory will stay a problem. "Memory pricing went up a lot. I think my prediction is that in 2027 it is going to be a very severe issue to all of us," he said. Intel projects the PC market slump will last at least through the first half of 2027, with a 10% decline in 2027 after a 12% slide in 2026.
Weak outlook shocks investors
The forecast is what sank the stock. Intel expects fourth-quarter revenue of $15 billion to $16 billion, well below the roughly $17 billion analysts expected. Adjusted profit is forecast at $0.25 per share, against expectations of $0.43. Gross margin is expected to narrow to about 38%, from 43% in the third quarter. Shares fell about 15% in late trading after the report, with some reports putting the drop above 20% at its worst point. The fall stands out because Intel stock had more than doubled in 2026 before the report, as investors bet the company would emerge as a key AI beneficiary. Supply problems added to the worry. An explosion at Intel's Fab 28 plant in Kiryat Gat, Israel, on October 14 killed two workers and shut down production. Intel expects the incident to cost roughly $600 million in lost revenue over two quarters. Tan said the data center unit would have done even better without raw material shortages and the factory shutdown.
What happens next
Intel is in the middle of a turnaround under Tan, who took over in March 2025. He has cut costs, improved the company's finances and attracted major outside investors, including Nvidia and the US government. The company has also raised its 2026 capital spending to $20 billion to expand production capacity. But the turnaround still needs proof. Intel must show it can win big outside customers for its foundry business, restore PC demand as memory supply eases, and turn booming data center demand into profit that holds up quarter after quarter. Until then, even a strong quarter may not be enough to satisfy investors.
Sources
- Business Times - https://www.businesstimes.com.sg/companies-markets/intel-plunges-after-pc-slump-and-supply-snags-hurt-outlook - Nikkei Asia - https://asia.nikkei.com/business/tech/semiconductors/intel-shares-sink-more-than-20-as-pc-slowdown-stretches-into-2027 - Intel - https://www.businesswire.com/news/home/20261029327355/en/Intel-Reports-Third-Quarter-2026-Financial-Results