Intel beat expectations on Thursday — and its shares fell anyway. The chipmaker’s third-quarter results were, on the numbers, a strong quarter. Its forecast for the fourth quarter was not. And in a market that has spent weeks asking whether artificial intelligence spending can keep paying for itself, the forecast is what investors traded on.
Third-quarter revenue was $16.5 billion, up 21 percent from a year earlier. Earnings per share came in at $0.60 on a GAAP basis and $0.52 on a non-GAAP basis, ahead of the roughly $0.40 analysts had expected. The standout was the data centre and artificial intelligence business, where revenue surged 78 percent to $7.3 billion — Intel’s strongest data centre growth in 15 years, driven by demand for its Xeon server processors, the chips that power much of the world’s AI infrastructure.
Then came the outlook. For the fourth quarter, Intel forecast revenue of $15.0 billion to $16.0 billion, with non-GAAP earnings of $0.25 per share. Analysts had been expecting around $17 billion in revenue and about $0.43 per share. The gap was large enough that shares fell sharply in after-hours trading, despite the beat.
Two Intels, moving in opposite directions
The results expose a company split in two. On one side, the data centre business is booming: customers building AI infrastructure cannot get enough Xeon processors, and Intel says its immediate priority is unlocking more supply to meet what chief executive Lip-Bu Tan called extraordinary demand. Its manufacturing arm, Intel Foundry, also grew, with revenue up 58 percent to $6.7 billion.
On the other side, the business Intel was built on is shrinking. Client computing — the chips inside personal computers — brought in $8.1 billion, down 5 percent from a year earlier and below expectations. Intel blames a familiar combination: soaring memory prices, tight IT budgets, and supply constraints. Tan warned that the PC slowdown is expected to continue at least through the first half of next year.
There was also a one-off blow. A fatal explosion at an Intel facility in Israel earlier this month disrupted production, and the company has said the disruption will cost about $300 million in revenue in each of the next two quarters.
Why the market punished a beat
Part of the reaction is about Intel itself: a forecast below the quarter just reported, with thinner margins — Intel expects a non-GAAP gross margin of about 38 percent in the fourth quarter, down from 44.1 percent in the third — suggests the recovery is not yet self-sustaining.
Part of it is about the wider mood. Intel’s slide follows a bruising week for big technology stocks, in which even strong results have been met with selling when spending plans look heavy. Investors are no longer rewarding revenue growth alone; they want to see that growth turn into profit, and soon. Intel’s fourth-quarter guidance told them to wait.
That does not make the quarter a failure. Revenue beat the company’s own guidance, data centre growth is real, and the foundry business is scaling. But it does reset the story Intel has been telling about its turnaround: the AI boom is lifting the company, but not fast enough, or profitably enough, to carry the parts of the business still in decline. Until the PC market stabilises and supply catches up with Xeon demand, Intel’s earnings will keep arriving with an asterisk — and, as Thursday showed, the market will keep reading the asterisk first.
Related: Alphabet’s $127.6 billion quarter also failed to satisfy investors, and Google’s stock crash wiped $500 billion off Alphabet in a single day. Intel’s official results are published here.
