Intel Stock Plummets After Disappointing Forecast, Factory Blast

Intel's stock experienced a significant drop of 23% in after-hours trading Thursday following the chip giant's release of a disappointing financial forecast and a warning about its cash flow. The company cited several factors for the weak outlook, including a fatal explosion at its Kiryat Gat, Israel, manufacturing plant. This incident is expected to reduce Intel's revenue by approximately $600 million over two quarters. Production difficulties and a decline in demand for personal computers also contributed to the grim forecast.

The October explosion at the Kiryat Gat facility resulted in two fatalities and one serious injury, according to media reports. The plant was shut down for about two weeks following the incident. Intel's Chief Financial Officer, David Zinsner, informed Reuters that the company aims to resume production at the plant by the end of the current week. The Kiryat Gat plant primarily produces chips for data centers using 10-nanometer manufacturing technology.

Zinsner explained that the explosion led Intel to lower its fourth-quarter revenue forecast by about $300 million and its gross profit margin forecast by approximately two percentage points. A similar impact is anticipated in the first quarter of 2027. The company is still assessing which damaged silicon wafers can be salvaged. "We will need to see if there will be an impact that continues beyond that," Zinsner stated. The disruption to production capacity is also expected to decrease the supply of chips for AI servers destined for cloud customers.

Intel projects fourth-quarter revenues between $15 billion and $16 billion, falling short of analysts' expectations of $17.07 billion. Adjusted earnings per share are forecast at just 25 cents, compared to the expected 43 cents. Intel CEO Lip-Bu Tan expressed disappointment during a call with analysts, stating, "I am disappointed that we have not been able to meet the strong demand from customers this quarter." He highlighted the company's struggles with manufacturing capacity shortages, a sharp rise in memory prices, and weakening demand for personal computers, predicting this market weakness will persist until at least the first half of 2027.

Despite the weak outlook, Intel's third-quarter results were positive, with revenues climbing 21% to $16.51 billion and adjusted earnings reaching 52 cents per share, surpassing analyst predictions of 40 cents. The stock decline in Intel also affected other chip companies, with shares of Nvidia, AMD, Broadcom, Micron, Qualcomm, and Arm falling between 1% and 6% in late trading. Meanwhile, Intel continues to invest in expanding its production capabilities, planning $20 billion in capital expenditures this year and anticipating a significant increase in investments in 2027. Zinsner indicated that Intel does not expect positive cash flow this year.