Intel shares plunge 23% after earnings warning and factory explosion impact
Intel warned of weaker demand, cash burn and a $600 million revenue hit from an October explosion, sending its stock down 23% in after-hours trading.
Intel's shares fell 23% in after-hours trading on Thursday after the chipmaker warned that cash burn will increase this year due to a softening PC market, manufacturing supply shortages and heavy spending on capacity expansion. The company also said the October explosion at its Kiryat Gat, Israel, plant will erase roughly $600 million in revenue over two quarters and reduce supplies of AI server chips.
CEO Lip-Bu Tan told analysts, "I'm disappointed that we were not able to meet strong customer demand in this quarter. We face near-term challenges, including manufacturing supply shortages, the unprecedented memory crunch, and the resulting softness in PC demand."
Intel projected fourth-quarter revenue of $15-$16 billion, below analysts' average estimate of $17.07 billion, and adjusted earnings of 25 cents per share, versus expectations of 43 cents. The company expects PC chip revenue to decline in the mid-20% range for the quarter after a 5% drop to $8.10 billion in the third quarter.
Finance chief David Zinsner said the Kiryat Gat facility, which produces data-center chips on a 10-nanometer process, will be ramped up by the end of the week following a two-week shutdown. He added that Intel lowered its fourth-quarter revenue outlook by about $300 million and cut its gross-margin outlook by roughly 200 basis points, with a similar impact expected in the first quarter.
Analyst Jay Goldberg of Seaport Research Partners noted, "I think we entered earnings season with the market in a pessimistic mood. No result is good enough, and bad results receive extra punishment."
Despite the setbacks, Intel plans to spend $20 billion on capital this year, with higher spending anticipated in 2027 as it secures additional chip-making tools. Zinsner said costs for the 18A technology used in "Panther Lake" chips have fallen 40% since the first quarter, which should support margins over the longer term.
For the third quarter ended September 26, Intel reported revenue of $16.51 billion, up 21% year over year, and adjusted profit of 52 cents per share, beating estimates.