Intel falls close to 30% after disappointing with its forecasts for the end of 2026

Intel came to fall nearly 30% on the stock market during the October 30 session after presenting forecasts for the fourth quarter that were lower than those expected by analysts. The decline occurred despite the fact that the company closed the previous quarter with more revenue and an adjusted earnings per share above consensus.

Revenue forecast 9% below consensus

The midpoint of Intel’s forecast is $15.5 billion, approximately 9.2% lower than market estimate. It would also be below the 16.5 billion entered in the third quarter.

The adjusted earnings per share forecast is $0.25, compared to the $0.43 expected by analysts. Intel also estimates an adjusted gross margin of 38% for the fourth quarter. These figures are management projections, not results already obtained.

In the quarter ended in September, revenue had increased 21%. Net income attributable to Intel was $3.3 billion, down 18% year over year, while adjusted earnings per share reached $0.52. The two measures use different accounting criteria and should not be confused.

The stock market crash should be read with that temporal distinction. The market reacted to what the company expects for the coming months, although the results for the period ended in September would have exceeded some forecasts. The percentage close to 30% corresponds to trading during the day and not to a definitive closure of Wall Street.

More expensive memory slows demand for computers

David Zinsner, CFO of Intelwarns that the weakness of the PC will continue at least during the first half of 2027. The company relates this scenario to the shortage of memory and its increase in price, which increases the cost of equipment and puts pressure on demand.

The problem affects Intel, although it does not manufacture the RAM modules for those computers. When your customers sell less equipment or adjust inventories, they also reduce or delay their processor purchases. The address precisely describes a stock correction among PC manufacturers.

In the third quarter, the Client Computing and Physical AI group brought in $8.1 billion, 5% less than a year earlier. The forecast points to a year-over-year decline in PC chip revenue of around 25% during the fourth quarter.

Data centers grow, but supply limits sales

The Data Center and AI division had a turnover of $7.3 billion, 78% more year-on-year. The progress reflects the demand for server processors and contrasts with the evolution of the PC business.

However, having orders available is not enough if the manufacturing capacity or components necessary to complete the products are insufficient. Lip-Bu Tan, CEO of Intelrecognizes that the company is not being able to satisfy all the demand of its customers.

Added to these restrictions is the October explosion at the Kiryat Gat factory.in Israel. Zinsner explained that the incident had reduced the fourth-quarter revenue forecast by about $300 million and the gross margin by approximately two percentage points.

The CFO expects a similar effect on revenue in the first quarter of 2027. Intel is still evaluating which wafers can be recovered after the outage, so the final extent of the damage to supply remains subject to review.

Foundry’s recovery still requires investment

Intel Foundry reported revenue of $6.7 billion, up 58% from a year earlier. This figure includes internal operations and is not equivalent to sales entirely made to external customers.

In the earnings call, Intel put external foundry revenue at $411 million. The division maintained operating losses of 1.9 billion, although it improved compared to the previous quarter.

Management attributes part of the progress to better manufacturing performances and lower costs. Zinsner says the cost of Intel 18A has dropped approximately 40% since the first quarter, as the company prepares capacity for its next processes.

This expansion also consumes cash. Intel maintains an expected gross capital expenditure of $20 billion for 2026 and anticipates a strong increase in 2027. Zinsner notes that it will probably not generate positive free cash flow next year due to the volume of investments.

Intel has not yet set a final investment figure for 2027. Zinsner explained that this budget will be finalized towards the end of the year, while it continues to place orders for manufacturing equipment.