Third-quarter revenue rose 21% to $16.5 billion and adjusted earnings were 52 cents a share. Intel expects fourth-quarter revenue of $15 billion to $16 billion and 25 cents of adjusted earnings, citing a slower PC market and an explosion at its plant in Israel.
Intel delivered the quarter it promised. The quarter it is promising next is much weaker than investors expected.
Revenue rose 21% to $16.5 billion. The GAAP gross margin widened 4.8 points to 43.0%, and the adjusted gross margin 4.1 points to 44.1%. Adjusted earnings were 52 cents a share, against an estimate of 41 cents. GAAP earnings were 60 cents.
"Revenue, gross margin and earnings per share exceeded guidance, including our strongest data center revenue growth in 15 years," said Zinsner, the chief financial officer.
The fourth quarter
Intel expects fourth-quarter revenue of $15.0 billion to $16.0 billion. Analysts polled by LSEG had expected $17.07 billion, so the $15.5 billion midpoint is about $1.6 billion short. It forecast adjusted earnings of 25 cents a share, against an estimate of 43 cents, and an adjusted gross margin of about 38.0%, six points below the third quarter.
Two forces explain the gap. The first is personal computers. "We see the PC slowdown continuing at least through the first half of next year," Zinsner said. Intel's client computing business, which sells PC chips, had revenue of about $8.1 billion, down 5%. Rising memory costs have been pressuring PC demand.
The second is an explosion at Intel's plant in Kiryat Gat, Israel, earlier this month. Intel said it will reduce fourth-quarter revenue by about $300 million and gross margin by about 200 basis points, with a similar revenue effect in the first quarter. The plant did not operate for two weeks.
The other side of the business
Data center and AI revenue rose about 78% to roughly $7.3 billion, and Intel Foundry revenue about 58% to about $6.7 billion. Chief Executive Tan said the results showed "improving execution, meaningful progress expanding supply and continued advancement of our process technology."
The reaction
Intel shares closed at $92.07 on Thursday, down 3.62%. After the report they fell about 23% in evening trading, and by about 4:30 a.m. ET on Friday they were near $67.86, down 26.3%, in thin trading. Other chipmakers and PC makers also fell overnight.
A setback or a reset?
The setback view: the fourth-quarter shortfall is mostly PC weakness and a one-time plant outage, while the data center and foundry businesses Intel is betting its turnaround on are growing quickly.
The reset view: the PC business is still the largest part of Intel, management expects it to stay weak for at least two more quarters, the plant problem extends into the first quarter, and the gross margin is guided six points lower.
What to watch
Friday's regular-session trading, the restart and output of the Kiryat Gat plant, PC demand data heading into the holiday season, and data center revenue against this quarter's 78% growth.