Intel beat quarterly forecasts as data-centre revenue surged, but a weak outlook, falling PC sales and a hit to margins sent shares tumbling.
Intel’s latest results showed a company still growing briskly, but investors chose to focus on what comes next. Shares fell sharply after the chipmaker reported third-quarter 2026 revenue of $16.5 billion, up 21% from a year earlier, and adjusted earnings per share of $0.52, well ahead of Wall Street expectations. The problem was the guidance: Intel said fourth-quarter revenue would come in at $15 billion to $16 billion and adjusted earnings would fall to about $0.25 a share, a forecast that suggested momentum is likely to slow materially. Reuters reported that the weak outlook triggered a broad sell-off in chip stocks, while the Associated Press said Intel’s shares suffered their steepest one-day decline since 1974.
For now, Intel’s strongest business is its data centre and artificial intelligence unit. Revenue in that segment jumped 78% to $7.3 billion in the quarter, and management described it as the fastest growth rate in the division in 15 years. The company said demand for those products continues to outstrip available supply, and chief financial officer David Zinsner told investors on the earnings call that the semiconductor industry is likely to remain supply constrained through 2027 and into 2028. That strength matters because it shows Intel is not short of demand everywhere; the company simply cannot yet convert all of it into shipments.
The drag is still the PC market. Intel’s client computing and physical AI segment, which includes chips for personal computers, posted revenue of $8.1 billion, down 5% from a year earlier and 9% from the previous quarter. Management blamed the weakness on higher memory prices, tighter IT budgets and customers working through inventory. Intel said those pressures are likely to deepen in the fourth quarter, with client revenue expected to fall by more than 20% sequentially. Independent research from IDC points in the same direction, forecasting an 11.3% decline in global PC shipments in 2026 and a further drop in the fourth quarter as memory shortages keep prices elevated.
The margin picture also turned less favourable. Intel’s non-GAAP gross margin rose to 44.1% in the third quarter, but it forecast a drop to 38% in the fourth, largely because lower sales would be spread across the same manufacturing base. The company also warned that an accident earlier this month at its Fab 28 site in Israel would shave about $300 million from revenue and cut gross margin by roughly 2 percentage points in the final quarter. On top of that, Intel said it expects 2026 capital expenditure of $20 billion, with spending set to climb sharply in 2027, while the August sale of $23 billion of new stock means future profits will be divided across a much larger share count.
That leaves the stock looking cheaper than it did before the earnings report, but not necessarily cheap. Even after the drop, Intel was still trading at a rich multiple of expected 2027 earnings, and those estimates may yet fall if the new guidance filters through analysts’ models. The business is clearly improving in data centres, but the near-term story is still dominated by a PC downturn that Intel itself expects to linger into 2027. For investors, the question is not whether the server business is recovering; it is whether the company can endure long enough for the PC cycle to turn without further pressure on profits and valuation.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
