Intel scored highly this quarter, yet plunged 20%+ after hours. The market isnโt looking at the report card; itโs looking at next semesterโs schedule.
First, the hard data (Intel IR, 10/29 earnings):
1๏ธโฃ Q3 revenue: $16.5B, +21% year over year; non-GAAP EPS: $0.52, versus guidance of $0.38 and LSEG expectations of $0.40
2๏ธโฃ Non-GAAP gross margin: 44.1%, up 4.1 ppt year over year; non-GAAP operating margin: 19.6%
3๏ธโฃ Data Center and AI (DCAI) revenue: $7.3B, +78%. The CFO said it was the strongest data center growth in 15 years
4๏ธโฃ Client PC business: $8.1B, -5%
The problem is the Q4 guidance:
Revenue of $15.0โ16.0B and non-GAAP EPS of $0.25. LSEG expected about $17.1B / $0.43โa sizable gap.
The reason is straightforward: memory is in short supply and expensive, weighing on PC demand. Management expects PC shipments to fall 12% in 2026, by more than 20% in the second half, and another 10% in 2027. Q4 client business is expected to decline more than 20% sequentially. The Fab 28 incident will also weigh on revenue by about $300M and gross margin by 200 bps.
My take:
Itโs not that Intel canโt tell an AI story; AI is simply so powerful that itโs sucking up all the memory for AI data centers, leaving PCs unable to get affordable memory. On the server CPU side, management expects industry shipments to grow by more than 30% in both 2026 and 2027, and says supply is the constraint.
AI is eating on one side, while PC customers are footing the bill on the other. In the short term, itโs all about the guidance; over the long term, the question is whether demand for CPUs from agentic AI can pick up the slack.
As for this pullback in U.S. tech stocks, Iโll say it again: donโt fight the Nasdaq. Pick your spots; donโt bet on direction.
Sources: Intelโs 10/29 earnings press release and earnings call; CNBC/LSEG estimates. Not investment advice.
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