Intel Stock Crash: Can chipmaker revive its turnaround strategy?

Intel shares plunged more than 20% in after-hours trading on Thursday, October 29, after the chipmaker delivered a disappointing earnings outlook despite reporting strong revenue growth in the September quarter. Concerns over slowing PC demand, rising memory-chip prices and manufacturing bottlenecks weighed on investor sentiment. The selloff also raised fresh questions about the company's turnaround strategy. (Sources: The Wall Street Journal, CNBC)

Intel reported third-quarter revenue of $16.5 billion, up 21% year-on-year, while adjusted earnings came in at 52 cents per share. Both figures exceeded or matched analyst expectations, reflecting stronger demand for data-centre and AI-related products. However, the upbeat quarterly performance failed to reassure investors as attention shifted to the company's weaker December-quarter forecast.

Intel forecast fourth-quarter revenue of $15 billion to $16 billion, below analysts' expectations of around $17 billion. The company projected adjusted earnings of 25 cents per share, significantly lower than the market estimate of around 43 cents. The weaker-than-expected outlook intensified concerns that Intel's recovery could take longer than anticipated.

Intel's data-centre and AI business emerged as a key growth driver, with revenue surging 78% year-on-year to $7.3 billion in the third quarter. Foundry revenue also climbed 58% to $6.7 billion. However, revenue from its client computing division, which includes PC processors, declined 5% to $8.1 billion, highlighting the contrasting performance across its businesses.

Persistently high memory-chip prices are emerging as a major challenge for the PC industry, increasing computer costs and weighing on consumer demand. Intel expects the PC market to contract further in 2027, with the weakness potentially extending through the first half of the year. The Wall Street Journal reported that pressure from elevated memory prices could persist into 2028, adding to concerns about a prolonged slowdown.

Supply constraints are preventing Intel from fully capitalising on strong demand for data-centre processors. Raw-material shortages and disruptions at its Israeli manufacturing facility have affected production. The company also faces pressure from heavy investments to expand manufacturing capacity, raising concerns about cash generation even as demand for AI infrastructure continues to grow.

Intel's recovery faces multiple hurdles, including weaker PC demand, manufacturing constraints and elevated capital expenditure. An explosion at its Israeli facility is expected to cost the company approximately $600 million in revenue over two quarters, according to Reuters. The combination of operational challenges and a weaker earnings outlook has raised fresh doubts about how quickly Intel can translate AI demand into sustainable growth and stronger profitability.

(Disclaimer: This slideshow is based on inputs from agencies. These do not represent the views of The Economic Times)