Intel reports Q3 revenue up 21% YoY to $16.5B, vs. $16.5B est., and forecasts Q4 revenue and adjusted EPS below estimates; INTC drops 16%+ after hours

Intel's stock drops over 16% after reporting weak Q4 guidance due to the PC slowdown.

Intel reported Q3 revenue of $16.51 billion, a 21% year-over-year increase and slightly exceeding the $16.5 billion estimate. The company also announced Q3 adjusted earnings per share of 52 cents, surpassing the 40 cents expected by analysts. However, Intel projected Q4 revenue between $15 billion and $16 billion and adjusted EPS of 25 cents, both falling below analyst expectations of $17.1 billion in revenue and 43 cents in EPS. This weak guidance was attributed to a continuing slowdown in the PC market, which finance chief David Zinsner anticipates will persist through the first half of next year. The company's Q3 results showed a 5% decrease in revenue for its client computing and AI group, while data center and AI revenue surged 78%. An explosion at an Israeli fab is expected to cost Intel approximately $600 million in lost revenue over two quarters.

Despite the company's strength in data center and AI revenue, the persistent PC market softness and a $600 million revenue impact from a fab explosion signal significant near-term headwinds for Intel. The forecast suggests that the recovery in its core client computing segment, which is crucial for overall growth and profitability, may take longer than initially anticipated. Investors will be watching closely to see if Intel can effectively navigate these challenges and leverage its advancements in foundry services to offset the decline in PC sales.

The performance of Intel's foundry business, particularly its most advanced 18A chip, remains a key area of interest as it seeks to become a viable second source to TSMC. While major chip customers are reportedly testing Intel's capabilities, securing significant new fabless clients is essential to diversify revenue and reduce reliance on its own CPU production. The company's ability to attract these customers will be a critical determinant of its long-term foundry success and its ability to compete effectively in the advanced semiconductor manufacturing landscape.