Intel Misses Expectations With Weak Outlook, Stock Plummets
Translated & summarized from Globes by baba
Intel exceeded third-quarter revenue and earnings expectations but issued a weak forecast for the current quarter, causing its stock to plummet nearly 20%. The company anticipates revenue of $15-16 billion, below analyst projections of $17 billion, and a gross profit margin decrease to 37%. CEO Lip-Bu Tan acknowledged the need to urgently increase chip supply amidst global shortages and rising costs. Despite recent successes and a strong stock performance year-to-date, the disappointing outlook has shaken investor confidence.
The story in 6 lines · by baba
- Intel's stock fell nearly 20% after reporting Q3 results that beat expectations but issued a weak Q4 forecast.
- The company projected current quarter revenue of $15-16 billion, missing analyst estimates of $17 billion.
- Intel's gross profit margin is expected to drop to 37% due to increased costs and memory chip shortages.
- CEO Lip-Bu Tan stated the company is urgently working to boost its chip supply.
- Despite the drop, Intel's stock had seen a 159% increase year-to-date prior to the announcement.
- The acquisition of Israeli company Talkline for $2.2 billion is expected to close in the first half of next year.
Intel reported its third-quarter 2026 results, exceeding revenue and earnings per share expectations but issuing a disappointing forecast for the current quarter. The chipmaker posted $16.5 billion in revenue, surpassing the $16.44 billion predicted by analysts, and earnings per share of 52 cents, well above the 40 cents expected. However, the company anticipates revenue between $15 billion and $16 billion for the current quarter, falling short of the $17 billion analysts had projected. Intel also expects its gross profit margin to decrease to 37% due to rising costs amid a global shortage of memory chips. In response, Intel's stock dropped nearly 20% in after-hours trading.
CEO Lip-Bu Tan stated the company is urgently working to increase its chip supply. Since Tan's appointment in March of the previous year, Intel has seen a quarterly increase in revenue and positive free cash flow. The company had previously beaten revenue forecasts in every quarter and earnings per share expectations in 75% of quarters over the past two years, fostering confidence in its recovery plan. The recently announced $2.2 billion acquisition of the Israeli company Talkline, which does not impact the reported results, is expected to close in the first half of next year.
Market concerns about rising memory chip prices and a potential dip in personal computer sales, Intel's primary revenue stream, had previously raised doubts about its profitability. Some analysts, however, believed Intel benefited from the demand for memory chips, as its factories package chips manufactured elsewhere. The market had anticipated Intel to raise its fourth-quarter revenue forecast to $16.9 billion with an adjusted profit of 43 cents per share.
Several trends have supported Intel's recent revenue and profitability growth, including the shift towards using energy-efficient CPUs from Intel and AMD for AI processing in large server farms. Additionally, the "America First" policy led to increased investment in the company and brought significant parts of the US defense system to manufacture chips in its plants. Cost-cutting and efficiency measures implemented by the CEO by the end of last year have also contributed. New manufacturing and packaging contracts with clients like Tesla and SpaceX, alongside renewed partnerships with Apple for MacBook processors and Google, have fueled hopes that Intel is on the right track after years of crisis.
Intel's stock had been one of the most profitable technology stocks of the year, with a 159% increase, significantly outperforming the S&P 500 and Nasdaq. Analysts' ratings showed 15 buy recommendations, 30 holds, and 5 sells, with an average target price of $95.
