Intel shares fell sharply in after-hours trading Thursday after the chipmaker warned that supply constraints, rising production costs and weaker demand for personal computers could weigh on its business into next year.
The company’s shares dropped nearly 23%. Despite reporting stronger-than-expected third-quarter profits, Intel issued a weaker outlook for the final three months of the year. The company reported total sales of $16.5 billion for the third quarter, up 21% from the same period last year. However, the results were overshadowed by Intel’s warning that it does not expect to generate positive cash flow this year as it continues to invest heavily in expanding its manufacturing capacity.
Intel expects fourth-quarter revenue to range from $15 billion to $16 billion, below analysts’ forecast of $17.07 billion.
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The company is also struggling to meet customer demand because of manufacturing bottlenecks. The situation has been further complicated by rising memory prices, which have pushed up personal computer prices and weakened consumer demand. Intel expects the slowdown in PC demand to continue through the first half of 2027.
“I’m disappointed that we were not able to meet strong customer demand in this quarter. We face near-term challenges, including manufacturing supply shortages, the unprecedented memory crunch, and the resulting softness in PC demand,” Intel CEO Lip-Bu Tan said during a conference call with analysts.
Chief Financial Officer David Zinser said Intel had committed to spending approximately $20 billion on capital expenditures this year. The investment is expected to increase significantly in 2027 as the company plans to purchase additional chipmaking equipment.
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Another setback came from an explosion at Intel’s Fab 28 semiconductor plant in Kiryat Gat, Israel, on Oct. 14. The incident reportedly killed two people and seriously injured another. The factory has been shut down for two weeks. The facility primarily produced data chips using Intel’s 10-nanometer manufacturing process. The damage is expected to reduce revenue by approximately $600 million across the fourth quarter of this year and the first quarter of next year. Zinser said the company would ramp up production at the facility by the end of this week.
The setbacks come as Intel attempts to rebuild its position in the semiconductor industry after losing ground to chipmakers such as Nvidia. Tan’s turnaround strategy includes strengthening the company’s contract manufacturing business, known as its foundry division, and improving its manufacturing technology.