The call is unlikely to reverse the after-hours drop on its own, since the near-term numbers carry more weight than roadmap milestones when guidance is this weak. The bigger read-across is to the PC supply chain. Management’s account of aggressive OEM inventory cuts points to pressure on PC makers, memory suppliers and Asian component manufacturers in coming quarters. The substrate shortage is a supply-side constraint that may benefit packaging material suppliers. The server growth estimate, though a company projection, adds to the broader case for data centre spending that has supported chip stocks this year.
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Earlier:
- Earnings bloodbath: Intel crashes over 22%, Amazon over 12%. What’s coming next?
- Intel shares tumble around 15%. The narrative is –> weak Q4 guidance overshadows Q3 profit beat
- Intel beats Q3 profit forecasts, but weak Q4 guidance and PC outlook weigh. Share price drops.
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Intel’s call offered a credible roadmap for the long run and a bruising list of problems for the next few quarters, and the market is paid to price the latter first.
Summary:
- Supportive: The first 18A server chip is shipping for revenue, and the first 18A-P server product is on track to ramp in 2027
- Supportive: Client chips are progressing, with Nova Lake ahead of schedule and Wildcat Lake demand ahead of supply; 18A-P and 14A are on track
- Supportive: Intel is engaged with a couple of strategic external foundry customers, 18A costs are down about 40% since Q1, and data centre revenue is seen up mid-teens in Q4
- Supportive: Intel estimates the server CPU market could grow fivefold to more than $200 billion over five years
- Caution: The PC correction has accelerated; client revenue is seen down more than 20% in Q4 and 2026 PC units down about 12%
- Caution: A substrate shortage is limiting output, capex is rising strongly into 2027, and no positive cash flow is expected this year
Intel’s post-earnings conference call gave investors material to support both sides of the argument after the shares fell around 20% in after-hours trading on weak fourth-quarter guidance. Management pointed to steady progress on its manufacturing roadmap and strong data centre demand. It also described a PC slump that has worsened quickly and warned that cash flow will remain under pressure.
On the supportive side, the chief executive said Clearwater Forest, the company’s first server processor built on its Intel 18A manufacturing process, is now shipping for revenue. Diamond Rapids, its first server product on the more advanced 18A-P process, is sampling and on track to ramp in 2027. On the PC side, Panther Lake has been ramped on 18A and demand for Wildcat Lake is running ahead of supply. Nova Lake, the first client chip on 18A-P, is tracking ahead of schedule, with design wins expected to be double those of Panther Lake at launch. The 18A-P process remains on course for launch across Intel’s own products by year end, and the next-generation 14A process is also on track.
Intel said it is engaged with a couple of external customers it described as highly strategic for 18A-P, a potentially important step for its foundry ambitions. The company also estimates the market for server processors could grow as much as fivefold over five years, from about $40 billion to more than $200 billion. The finance chief said 18A costs have fallen roughly 40% since the first quarter. Data centre and AI revenue should grow by a mid-teens percentage from the third quarter to the fourth.
The case for caution centres on PCs and cash. The chief executive said the PC correction has accelerated over the past two months, as computer makers aggressively cut inventory to match softer end demand. Intel expects client computing revenue to fall by more than 20% from the third quarter. It now sees 2026 PC unit sales declining about 12%, with second-half units down more than 20%. An industry-wide shortage of advanced substrates used in its EMIB chip packaging is also limiting its ability to scale output.
Spending is heavy and rising. Gross capital expenditure remains on track for $20 billion this year, and the company expects it to rise strongly in 2027, with equipment spending set to climb further next quarter. The finance chief does not expect positive cash flow this year and also indicated that a factor related to Israel would likely weigh mainly on fourth-quarter margins. Intel expects payments to minority partners in its joint ventures, known as non-controlling interest, of about $250 million in the fourth quarter. It sees around $1.1 billion in each of 2027 and 2028, reducing the profit that flows to shareholders.
The call leaves a clear split for investors. The technology roadmap and data centre outlook support the longer-term turnaround story. The PC downturn, supply constraints and rising spending point to a difficult few quarters before those gains show up in earnings and cash flow
This article was written by Eamonn Sheridan at investinglive.com.