Intel’s shares plunged 25% in pre-market trading on Friday after the chip maker warned that it would burn cash this year. It cited a faltering PC market, manufacturing bottlenecks and heavy spending on expanding production.
Like many other big tech companies, Intel has been pouring money into manufacturing. But supply disruptions have limited its ability to capitalise on growing demand for data centre chips. On top of that, PC prices are rising because of the surge in memory prices, and that has weighed on demand.
Intel warned on Thursday that the weak demand could last through the first half of 2027. It also forecast revenue for the December quarter below market expectations.
The company said in an interview that it expects this month’s deadly explosion at its plant in Israel to erase roughly US$600-million in revenue over two quarters and reduce supplies of AI server chips to cloud customers.
“I’m disappointed that we were not able to meet strong customer demand in this quarter,” Intel CEO Lip-Bu Tan said on a conference call with analysts. “We face near-term challenges, including manufacturing supply shortages, the unprecedented memory crunch and the resulting softness in PC demand.”
The gloomy outlook reverberated across the chip sector. The US-listed shares of Nvidia, Broadcom, AMD, Micron, Qualcomm and ARM Holdings fell between 1% and 6% in extended trading.
If Intel’s stock were to lose 25% in Friday’s regular session, it would shed more than $122-billion in market value. The stock has more than doubled this year.
PC chips business sinks
“I think we entered earnings season with the market in a pessimistic mood. No result is good enough, and bad results receive extra punishment,” said Jay Goldberg, an analyst at Seaport Research Partners.
Intel expects revenue from PC chips to fall by a percentage in the mid-20s in the fourth quarter, after a 5% drop to $8.1-billion in the third quarter.
It forecast fourth-quarter revenue of between $15-billion and $16-billion, below analysts’ average estimate of $17.07-billion, according to LSEG data. It expects adjusted profit of 25 US cents a share, against estimates of 43 cents.
Two people were killed and one was seriously injured in the explosion at Intel’s factory in Kiryat Gat, Israel, according to media reports. Chief financial officer David Zinsner said Intel planned to start ramping up production at the plant by the end of this week, after a two-week shutdown.
The Kiryat Gat factory mainly produces data centre chips using Intel’s 10-nanometre manufacturing process.
Zinsner said Intel had lowered its fourth-quarter revenue outlook by roughly $300-million and cut its gross margin outlook by about two percentage points (200 basis points). He expects a similar hit in the first quarter.
Intel is still working out which wafers can be salvaged for use and sale after the blast. “We’ll have to see whether there is an impact that stretches beyond that,” Zinsner said.
“The explosion at Kiryat Gat, one of Intel’s major manufacturing sites, is unfortunate and brought down Intel’s capacity,” said Hendi Susanto, portfolio manager at Gabelli Funds.
Tan has been leading the company’s turnaround after it fell behind Nvidia, whose graphics processors dominate the AI boom. Intel’s contract manufacturing, or foundry, business is a key part of his strategy.
On the call, Zinsner said Intel did not expect positive cash flow this year as it expands manufacturing capacity. He said the company remained on track to spend $20-billion in capital this year, and that this spending would rise sharply in 2027 as Intel buys more chipmaking tools.
Zinsner also said that the cost of 18A, the manufacturing process Intel uses to make its Panther Lake PC chips, had fallen 40% since the first quarter, which should help margins in the longer term.
In the third quarter, which ended on 26 September, revenue rose 21% to $16.51-billion, in line with estimates. Adjusted profit came in at 52 US cents a share, beating estimates of 40 cents. — Anhata Rooprai, Stephen Nellis and Max A Cherney, (c) 2026 Reuters
