Intel’s data center business just had its strongest growth in 15 years, and the company still told investors it can’t build enough server chips. Its fourth-quarter forecast landed well under analyst estimates, and the stock was down 25% in premarket trading Friday, CNBC data showed.
Intel guided to revenue of $15 billion to $16 billion and adjusted earnings of 25 cents a share for the quarter. Analysts polled by LSEG had expected $17.1 billion and 43 cents, per CNBC. The third quarter itself beat: revenue rose 21% to $16.5 billion and adjusted EPS was 52 cents, the company said in its earnings release Thursday.
Memory prices are squeezing PC buyers
Revenue in the Client Computing and Physical AI Group, Intel’s PC unit, fell 5% from a year earlier to $8.1 billion, while Data Center and AI revenue jumped 78% to $7.3 billion. On the earnings call, CEO Lip-Bu Tan said Intel’s customers began signaling a PC slowdown in recent weeks because of memory prices and availability, with higher system prices “placing additional pressure on already limited IT budgets.”
CFO David Zinsner said Intel expects PC units across the industry to decline about 12% in 2026, with second-half units down more than 20%, and it is planning for a drop of roughly 10% in 2027. He expects client revenue to fall more than 20% from the third quarter as customers cut inventory. “We see the PC slowdown continuing at least through the first half of next year,” Zinsner said in the release.
What the Fab 28 accident costs
The outlook also absorbs an explosion earlier this month at Intel’s Fab 28 in Kiryat Gat, Israel, which killed two workers and seriously injured a third, CNBC reported. Tan called it an “unfortunate and tragic accident” that led to an extended shutdown. Those remarks were Intel’s first statements on the explosion, Calcalist’s Ctech noted.
Zinsner told analysts the fab had been shut for about two weeks and that Intel expects to restart production by the end of this week while it sorts out which wafers in the line can still be used. The guidance includes roughly $300 million of lost revenue and 200 basis points of gross margin, almost all of it tied to 10-nanometer server products, and he expects a similar revenue hit in the first quarter. He called the figures “somewhat of an early assessment.” Asking a question on the call, Bernstein analyst Stacy Rasgon put the 38% gross margin guide at about 40% excluding the incident.
Server customers will wait longer
Companies buying servers got a direct warning on supply. Zinsner said demand for Intel’s data center products “continues to meaningfully exceed available supply,” and that Intel expects the industry “to remain supply constrained throughout 2027 and into 2028.” Tan listed Intel 3 yields and a shortage of advanced organic substrates for its EMIB packaging as limits on output, alongside Israel. Intel now expects industry server CPU units to grow more than 30% in both 2026 and 2027.
The report capped a hard week for big tech results. Alphabet shares closed 13% lower Thursday after its own quarter, and Amazon was down 7% before the open Friday following its report, CNBC said. Earlier this week Intel announced plans to acquire quantum software company Classiq.
Spending is set to climb from here. Gross capital expenditures remain on track for $20 billion this year and should be “up strongly” in 2027, which Zinsner called “an investment year” for Intel. “So I don’t think that this will be a year in which we see positive cash flow,” he said.