Intel projects $600 million revenue loss from Israel fab explosion, cites tighter Xeon supply
Intel said the Oct. 14 blast at its Fab 28 plant in Kiryat Gat will cost about $600 million in revenue across two quarters and reduce its fourth-quarter gross margin by roughly two points, as the outage hits 10-nanometer server chips.
Intel announced that the explosion at its Fab 28 facility in Kiryat Gat, Israel, will erase roughly $600 million of revenue over the fourth quarter of 2026 and the first quarter of 2027. The incident, which killed two workers and injured a third on Oct. 14, halted production for about two weeks.
Chief Financial Officer Dave Zinsner told investors that the impact amounts to about $300 million in each of the two quarters and will cut the fourth-quarter non-GAAP gross margin by approximately two percentage points. > "Please note almost all of the $300 million impact from Fab 28 is related to 10-nanometer server products," Zinsner said on the earnings call.
The company is still evaluating wafers that were in process at the time of the blast to determine what can be salvaged. Zinsner described the assessment as preliminary and said most write-offs will be reflected in the fourth quarter, with the margin effect front-loaded even though shipment shortfalls will extend into early 2027.
Fab 28 produces Intel’s 10 nm-class and Intel 7 process nodes, which supply I/O dies for the current Xeon 6 server line and the older Xeon 5 Emerald Rapids parts. Intel has not disclosed which Xeon families are directly affected or how many wafers were damaged. The company noted that shifting production to other U.S. fabs capable of 10 nm output, such as Fab 12, Fab 22, Fab 32 and Fab 42 in Arizona, is not a simple solution because capacity is already stretched and some lines lack the necessary qualifications.
Chief Executive Lip-Bu Tan listed the Israel outage as one of three headwinds limiting Intel’s ability to meet server demand, alongside yield issues on the Intel 3 node and a shortage of advanced substrates. He said the situation will affect fourth-quarter 10-nanometer server shipments.
Analysts highlighted that the margin shortfall would have been about two points higher without the incident, and that the impact is expected to be largely confined to the fourth quarter. Israeli authorities suspect the blast was caused by a malfunctioning gas cylinder containing nitrogen trifluoride, a cleaning gas used in chipmaking. Intel said it is cooperating with the investigation.
The disruption comes as the market for older-generation Xeon processors was already tight, prompting some customers to consider extending refresh cycles or turning to rival platforms. AMD’s EPYC CPUs captured a record share of the x86 server market in early 2026, reflecting the heightened competition amid constrained supply.