Intel shares slump 28.58% on PC slowdown warning

Intel shares closed 28.58% lower at $65.76 on Friday 30 October after the chipmaker warned that a PC slowdown and rising component costs would weigh heavily on its fourth-quarter performance. The fall was Intel’s worst since 1974, according to the Associated Press.

The sell-off followed Intel’s third-quarter results, released on Thursday. Revenue rose 21% year on year to $16.5 billion and non-GAAP earnings per share reached $0.52, but its outlook disappointed investors. Intel forecast fourth-quarter revenue of $15 billion to $16 billion and non-GAAP earnings per share of $0.25, versus analyst expectations of roughly $17 billion and $0.43 respectively.

PC demand is weakening as memory costs rise

Intel said the PC slowdown would continue at least through the first half of 2027. Its Client Computing and Physical AI Group generated $8.1 billion in third-quarter revenue, down 5% year on year, as customers faced higher component prices, tighter IT budgets and more cautious inventory management.

Chief executive Lip-Bu Tan said memory shortages had pushed PC prices up “significantly”. Intel expects client sales to fall by more than 20% sequentially in the fourth quarter, according to comments from its earnings call reported by CRN.

“The pace of this PC correction has accelerated over the last two months as our OEM partners are aggressively managing inventory to match the softer sell-through.”

Intel’s chief financial officer, David Zinsner, said the company expected the weakness to persist into next year. Intel’s estimates, reported by Tom’s Hardware from the earnings call, put PC unit demand down by around 12% in 2026 and roughly 10% in 2027.

AI demand is creating a supply squeeze

The company and financial reports linked the pressure in part to memory manufacturers shifting capacity towards high-bandwidth memory for AI data-centre systems. That leaves less conventional memory available for PCs, raising costs for manufacturers and consumers.

Intel also said shortages of memory, substrates and other critical components were affecting both its ability to supply products and demand in price-sensitive client markets. It expects those shortages to continue into 2027.

Data-centre growth cannot offset the warning

There was a sharp contrast between Intel’s PC and server businesses. Its Data Center and AI division reported $7.3 billion in third-quarter revenue, up 78% year on year, which Intel described as the division’s strongest growth in 15 years.

However, demand for Xeon processors is exceeding Intel’s available supply. The company cited constraints in manufacturing capacity, Intel 3 production and advanced packaging substrates used for Xeon 6 and Xeon 6+ products.

Intel is also dealing with the effects of an accident at its Kiryat Gat manufacturing facility in Israel in mid-October. The stoppage lasted about two weeks and is expected to affect manufacturing costs, gross profit and operating results in the fourth quarter and through the first half of 2027, according to Intel.

What happens next

Intel said it does not expect positive cash flow in 2026 and plans to increase capital spending significantly in 2027 as it expands capacity and secures equipment and key components. For now, the market reaction reflects concern that strong AI and server demand cannot fully shield Intel from a more immediate PC downturn.