Intel shares plunged in after-hours trading on Thursday after the chipmaker issued a weaker-than-expected fourth-quarter outlook, overshadowing stronger earnings and rapid growth in its data-centre and artificial intelligence business.
The stock fell 17% to $75.84 after the company reported third-quarter revenue of $16.5 billion, up 21% year over year but slightly below Wall Street expectations of $16.6 billion.
Adjusted earnings per share reached 52 cents, beating analysts’ forecast of 41 cents.
Intel’s fourth-quarter guidance disappointed investors, with the company citing weaker-than-expected personal computer demand and production disruption following a fatal explosion at one of its facilities in Israel earlier this month.
The incident killed two employees and affected production, adding pressure to an outlook already challenged by weakness in the PC market.
Despite the after-hours decline, Intel shares remained up about 150% this year.
However, they had already fallen 35% from their record high on June 22 as of Thursday’s regular-session close.
Fourth-quarter guidance falls short of expectations
Intel expects fourth-quarter adjusted earnings of 25 cents per share on revenue of $15 billion to $16 billion.
Analysts had forecast earnings of 45 cents per share and revenue of $17.3 billion, according to FactSet.
The outlook reflects challenges in Intel’s client-computing business, which supplies chips for personal computers.
Revenue from the segment fell 5% year over year to $8.1 billion in the third quarter, missing analysts’ expectations of $8.9 billion.
Investors have been concerned that rising memory prices could weaken demand for laptops and other personal computers.
John Pitzer, Intel’s corporate vice president of investor relations, told MarketWatch that PC demand was weaker than anticipated.
He said the effect of rising memory prices came sooner and was deeper than the company had expected.
Pitzer also said the explosion at Intel’s Israeli facility contributed to the weaker revenue outlook.
The combination of softer PC demand and production disruption has complicated Intel’s near-term growth prospects despite strong performance in other parts of its business.
Data-centre and AI revenue surges 78%
Intel’s data-centre and AI business was the strongest performer in the third quarter, with revenue climbing 78% year over year to $7.3 billion.
The figure exceeded analysts’ expectations of $6.7 billion and represented the segment’s fastest growth rate in 15 years, according to the company.
The performance highlights the growing importance of AI-related infrastructure demand to Intel’s business.
While the company benefited from strong sales in this segment, the gains were insufficient to offset weakness in its personal-computing operations and the disappointing outlook.
The contrasting results from Intel’s two major business areas also illustrate how demand trends are diverging across the semiconductor industry.
Earnings beat fails to offset revenue and outlook concerns
Intel’s third-quarter adjusted earnings of 52 cents per share more than doubled from 23 cents a year earlier and exceeded Wall Street’s forecast.
Revenue rose to approximately $16.51 billion from the prior-year period, but narrowly missed the consensus estimate of $16.55 billion.
The earnings beat offered some evidence of improving profitability, but investors focused on the weaker outlook for the December quarter.
With expected revenue of $15 billion to $16 billion falling short of market expectations, Intel faces pressure to address both production constraints and slowing demand in its PC business.
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