Intel Stock Crashes 18% as Weak Q4 Forecast Overshadows 78% AI Server Growth
By Daniel Carter | October 29, 2026
Key Takeaways
- Intel shares fell approximately 18% in after-hours trading following a disappointing fourth-quarter revenue and earnings forecast.
- Despite a 21% increase in third-quarter revenue to $16.5 billion and adjusted earnings of $0.52 per share, the outlook for Q4 was significantly below Wall Street expectations.
- Data Center and AI revenue surged 78% to $7.3 billion, marking the strongest growth in 15 years.
- An explosion at Intel's Israeli manufacturing facility is projected to reduce revenue by about $600 million across Q4 2026 and Q1 2027.
- Weak demand for PCs, manufacturing disruptions, and rising capital expenditures overshadowed the positive growth in AI infrastructure.
Q3 Earnings Overview
Intel reported third-quarter revenue of $16.5 billion, which matched expectations and represented a 21% year-over-year increase. Adjusted earnings per share (EPS) of $0.52 surpassed the consensus estimate of $0.40. Key metrics included:
| Metric | Q3 2026 Result | Year-Over-Year Change |
|---|---|---|
| Revenue | $16.5 billion | +21% |
| Adjusted EPS | $0.52 | N/A |
| Adjusted Gross Margin | 44.1% | +4.1 percentage points |
| Adjusted Operating Margin | 19.6% | +8.4 percentage points |
| Data Center and AI Revenue | $7.3 billion | +78% |
| Client Computing Revenue | $8.1 billion | -5% |
| Intel Foundry Revenue | $6.7 billion | +58% |
Reasons for Stock Decline
The significant drop in Intel's stock price was primarily due to its fourth-quarter outlook, which projected revenue between $15 billion and $16 billion, falling short of the $17.07 billion expected by analysts. Additionally, the forecast for adjusted earnings was set at $0.25 per share, compared to the $0.43 consensus. The company also anticipated a decline in adjusted gross margin to 38% from 44.1% in Q3.
Intel attributed this weak forecast to:
- Deteriorating demand for PCs.
- Supply limitations and disruptions at its Kiryat Gat manufacturing facility in Israel.
AI Server Revenue Growth
Intel's Data Center and AI division showed remarkable performance, with revenue increasing 78% year-over-year to $7.3 billion. The operating profit for this division reached approximately $3 billion, yielding an operating margin of about 42%. Demand was robust across various sectors, including hyperscale cloud providers and AI-focused companies. Intel expects server CPU shipments to rise significantly as companies invest in AI infrastructure.
Challenges Ahead
Despite the growth in AI, Intel's Client Computing division faced challenges, with revenue declining 5% to $8.1 billion. The company anticipates a further decline in client revenue by over 20% sequentially in Q4. The broader PC market is expected to contract by approximately 12% in 2026 and another 10% in 2027.
Moreover, an explosion at Intel's Israeli facility is expected to cost the company around $600 million in lost revenue over two quarters, further complicating its outlook.
Conclusion
While Intel's growth in the AI server market is promising, the company faces significant headwinds from declining PC demand, manufacturing disruptions, and increased capital expenditures. For a sustainable recovery in stock price, investors will need to see evidence that the growth in AI can offset these challenges.