Intel shares slide 15% as weak Q4 guidance outweighs Q3 profit beat

This large drop in a major index stock could pressure Nasdaq futures when Asian markets open and affect sentiment for semiconductor stocks, especially those tied to PC demand. The caution on PCs has implications for Asian hardware suppliers, memory makers, and contract manufacturers, which might face selling pressure in regional trading. The better-than-expected data centre and AI results could cushion AI-focused chip names, making the sell-off more concentrated in the PC supply chain. The regular US trading session will reveal if the after-hours decline persists.

Intel delivered a strong quarter but a weak outlook, and traders in after-hours trading showed which mattered more.

The key takeaways are as follows:

• Intel's stock dropped roughly 20% in extended trading.
• For Q4, the company guided adjusted earnings per share to $0.25 versus the $0.43 consensus, revenue between $15 billion and $16 billion compared to roughly $17 billion expected, and an adjusted gross margin of 38% against 42.8%.
• Intel forecasts the PC market will shrink until at least the latter part of 2027.
• Third-quarter adjusted EPS arrived at $0.52, above estimates; revenue of approximately $16.5 billion matched expectations, and margins exceeded forecasts.
• Datacenter and AI as well as Foundry outperformed estimates, while Client Computing and free cash flow fell short.
• The editorial view is that the decline appears overdone and that buyers may step in (this is an opinion, not investment advice).

Approximately 15% was wiped off Intel's stock in after-hours trading after the company released fourth-quarter guidance that came in far below forecasts. The disappointing outlook outweighed a third-quarter performance that exceeded profit and margin estimates.

The guidance caused the damage. Intel provided a Q4 adjusted EPS forecast of $0.25, while analysts had expected $0.43, and revenue in a range of $15 billion to $16 billion. The midpoint of that revenue range is about $1.5 billion less than the roughly $17 billion analysts had forecast and roughly $1 billion below the third quarter's revenue. The adjusted gross margin guidance of 38% was likely the most harmful number, coming in nearly five percentage points below expectations and representing a sharp drop from the 44.1% reported for Q3.

Intel added that it anticipates the PC market will contract until at least the second half of 2027. This is a major concern for Client Computing, Intel's biggest segment, which supplies processors for PCs. That division already fell short of estimates in Q3, posting revenue of approximately $8.1 billion versus an expected roughly $8.8 billion.

The third-quarter results themselves were more positive. Adjusted EPS came in at $0.52, above the $0.41 consensus, while revenue of roughly $16.5 billion met expectations. The adjusted operating margin hit 19.6%, three percentage points above estimates. Datacenter and AI revenue of approximately $7.3 billion and Intel Foundry revenue of around $6.7 billion both exceeded forecasts. However, adjusted free cash flow of about $1.6 billion was roughly half of what was forecast, though only two analysts had provided a prediction.

Intel has not yet explained the reasons behind the margin decline. Remarks on the earnings call regarding costs, product mix, and when a recovery might occur will be crucial in determining if the sell-off continues into the regular trading session.

From my perspective, a decline of this magnitude seems overdone for a company that has just surpassed profit estimates and demonstrated growth in its data centre and foundry units. While the guidance is weak, I believe a roughly 15% drop might attract buyers at these reduced prices. This is solely my opinion and should not be taken as investment advice. The bearish argument is evident: if the PC slump persists into late 2027 and margins hover around 38%, the reduced earnings outlook could support a lower valuation over the longer term.