Intel Stock Crashes 18% as Weak Q4 Forecast Overshadows 78% AI Server Growth

Key Takeaways

• Intel shares plunged around 18% in after-hours trading after the company issued fourth-quarter revenue and earnings guidance well below Wall Street forecasts.
• Third-quarter revenue rose 21% to $16.5 billion, while adjusted earnings of $0.52 per share exceeded analysts’ expectations.
• Data Center and AI revenue surged 78% to $7.3 billion, marking Intel’s strongest data-center growth in 15 years.
• An explosion at Intel’s Israeli manufacturing facility is expected to reduce revenue by approximately $600 million across the fourth quarter and first quarter of 2027.
• Weak PC demand, manufacturing disruption and rising capital spending overshadowed evidence that Intel is benefiting from the AI infrastructure boom.

Intel stock tumbled approximately 18% in extended trading after a disappointing fourth-quarter forecast eclipsed better-than-expected earnings and rapid growth in the company’s artificial intelligence server business.

The chipmaker reported third-quarter revenue of $16.5 billion, broadly matching Wall Street expectations and rising 21% from the previous year. Adjusted earnings reached $0.52 per share, comfortably above the $0.40 consensus estimate.

However, investors focused on Intel’s warning that weaker PC demand and a factory disruption in Israel would weigh heavily on its results during the final months of 2026.

Intel’s Q3 Earnings Beat Wall Street Forecasts

Intel delivered stronger profitability during the third quarter as data-center demand improved and margins recovered.

The company’s adjusted gross margin expanded to 44.1% from 40% a year earlier. Adjusted operating margin increased to 19.6%, while adjusted net income climbed 169% to $2.8 billion.

Intel’s headline results were:

Intel generated $5.1 billion in operating cash flow during the quarter. GAAP net income was $3.3 billion, although it fell 18% from the previous year because of one-time items and accounting differences.

Why Did Intel Stock Fall 18%?

The sell-off was driven primarily by Intel’s fourth-quarter outlook.

Management expects revenue of between $15 billion and $16 billion, far below the approximately $17.07 billion anticipated by analysts. Intel also forecast adjusted earnings of $0.25 per share, compared with the $0.43 Wall Street consensus.

The company expects its adjusted gross margin to fall to 38%, a sharp decline from 44.1% in the third quarter.

Intel attributed the weak forecast to deteriorating PC demand, supply limitations and disruption at its Kiryat Gat manufacturing facility in Israel. The scale of the guidance miss raised concerns that growth in Intel’s AI server business will not be enough to offset weakness elsewhere in the company.

AI Server Revenue Surges 78%

Intel’s Data Center and AI division was the strongest part of its earnings report. Revenue jumped 78% year over year to $7.3 billion and rose 17% from the previous quarter.

Operating profit at the division reached approximately $3 billion, representing an operating margin of about 42%.

Demand was broad-based across hyperscale cloud providers, traditional enterprises and newer AI-focused cloud companies. Revenue from Intel’s purpose-built silicon products increased 50% sequentially and more than doubled from the previous year.

The company said demand for Xeon server processors is currently exceeding available supply. Intel expects industry server CPU shipments to increase by roughly 30% in both 2026 and 2027 as companies deploy more AI infrastructure and agent-based applications.

Management believes these workloads could eventually expand the server CPU market from approximately $40 billion to more than $200 billion over five years. Unlike AI training, which is dominated by graphics processors, agentic applications also require conventional CPUs to manage data, operate software environments and coordinate multiple tasks.

Weak PC Demand Remains a Major Problem

The Client Computing division continued to weigh on Intel’s outlook. Revenue fell 5% to $8.1 billion, missing analysts’ forecast of approximately $8.98 billion.

Management expects client revenue to decline by more than 20% sequentially in the fourth quarter. Intel projects the broader PC market will contract by around 12% in 2026, followed by another decline of approximately 10% in 2027.

AI-enabled PCs provided one bright spot, with revenue from the category rising 35% year over year. Nevertheless, that growth was insufficient to offset declining overall PC shipments.

Intel expects the weakness to continue through at least the first half of 2027, limiting the company’s ability to capitalize fully on its stronger data-center performance.

Israel Factory Explosion Could Cost Intel $600 Million

Intel’s outlook was also affected by an explosion at its Fab 28 manufacturing facility in Kiryat Gat, Israel.

The facility was shut for approximately two weeks, disrupting production and reducing available chip supply. Intel estimates that the incident will lower fourth-quarter revenue by around $300 million and reduce gross margin by approximately two percentage points.

A similar $300 million revenue impact is expected in the first quarter of 2027, bringing the estimated two-quarter cost to roughly $600 million. Intel expects production to recover progressively after the facility restarts.

Foundry Growth Comes With Higher Spending

Intel Foundry reported revenue of $6.7 billion, up 58% from a year earlier. However, most of that revenue came from Intel’s own product divisions rather than outside customers. External foundry revenue was approximately $411 million.

The company maintained its 2026 gross capital expenditure forecast at around $20 billion and warned that spending could rise significantly in 2027 as it expands manufacturing capacity.

Intel recently completed a $23 billion equity offering, strengthening its balance sheet and helping fund its manufacturing strategy. The new shares will dilute existing investors, while the higher spending plan could place additional pressure on free cash flow.

Intel’s AI server growth demonstrates that the company is participating in the infrastructure expansion surrounding artificial intelligence. For the stock to recover sustainably, however, investors will need evidence that server momentum can offset the PC downturn, factory disruption and heavy capital requirements.