Intel (INTC) Q3: Profit Tops Estimates, Shares Plunge on a Weak Forecast
Intel beat on profit and grew data-center sales 78%, but guided Q4 revenue to $15.0–16.0 billion, short of the $17.07 billion expected. The stock plunged 19.6% after hours as of 5:20 p.m. ET.
Intel (INTC) reported third-quarter revenue of $16.51 billion, up 21% year on year and in line with the roughly $16.5 billion analysts expected, Reuters and Yahoo Finance reported. Adjusted earnings of 52 cents a share beat the 40 cents Wall Street was looking for, according to Reuters. The shares plunged 19.6% after hours to $74.06 as of 5:20 p.m. ET, after Intel’s forecast for the last three months of the year came in well below estimates, Reuters and The Next Web reported.
What stood out
Servers carried the quarter. Revenue in Data Center and AI, the unit that sells Xeon processors for servers, rose 78% to $7.32 billion. “Revenue, gross margin and earnings per share exceeded guidance, including our strongest data center revenue growth in 15 years,” Chief Financial Officer David Zinsner said in the results release.
PCs went the other way. The Client Computing and Physical AI Group, which makes laptop and desktop chips and still brings in about half of Intel’s product revenue, shrank 5% to $8.10 billion. Analysts had expected $8.8 billion to $9.0 billion, according to estimates cited by Yahoo Finance and Channel NewsAsia.
Profitability improved. The adjusted gross margin, the share of sales left after the cost of making the chips, was 44.1%, against 42.0% in Intel’s own forecast. GAAP earnings of 60 cents a share were down from 90 cents a year earlier.
The outlook
The forecast is what sank the stock. Intel expects fourth-quarter revenue of $15.0 billion to $16.0 billion, against $17.07 billion expected, according to LSEG data cited by Reuters. It sees adjusted earnings of 25 cents a share, where analysts wanted 43 cents, and an adjusted gross margin of 38.0%, down from 44.1%.
Two things are weighing on it. A shortage of memory chips has pushed up the price of PCs and hurt demand, Reuters and The Next Web reported. “Looking ahead, we see the PC slowdown continuing at least through the first half of next year,” Zinsner said in the release.
The second is a deadly explosion in October at Intel’s chip factory in Kiryat Gat, Israel. Reuters and Yahoo Finance reported that it will cut about $300 million from fourth-quarter revenue. Supply is now the constraint for servers: “Our immediate priority is to unlock additional supply to meet extraordinary demand for our Xeon family,” Chief Executive Lip-Bu Tan said in the release.
Our take
The quarter itself was good: the fastest data-center growth in 15 years and margins above plan. But the stock had risen 149.5% this year going into the report, and a forecast that sits about $1.6 billion below estimates at its midpoint leaves little room for that. Next quarter, we’ll watch whether Intel can make enough Xeon chips, how quickly Kiryat Gat recovers, and whether memory prices keep squeezing PC sales.
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Mostly Markets is for information and education only and isn't investment advice. Dev Malhotra is a pen name. Prices are from Nasdaq and CNBC as of the time stated.
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