Intel Shares Fall About 20% as Xeon Shortage and PC Slump Cloud Q4 Guidance Despite 78% Data-Centre Growth

Intel reported third-quarter revenue of $16.5 billion on 29 October 2026, up 21% from a year earlier, as data-centre sales jumped 78% to $7.3 billion. The company then guided fourth-quarter revenue to $15 billion to $16 billion, below the roughly $17 billion analysts had expected, and shares fell by about 20% in after-hours and pre-market trading, according to Money Morning and HotHardware.

What did Intel report for the third quarter?

According to Intel's own release, revenue for the quarter ended 26 September was $16.5 billion, against $13.7 billion a year earlier. GAAP gross margin was 43.0% and non-GAAP gross margin 44.1%. Non-GAAP earnings per share were $0.52, compared with $0.23 a year ago. GAAP earnings per share were $0.60, down from $0.90. Cash from operations was $5.1 billion.

The segments diverged sharply. The Data Center and AI group (DCAI) posted $7.3 billion, up 78%, with operating income of $3.04 billion against $0.96 billion a year before. The Client Computing and Physical AI Group (CCPG), which houses the PC business, fell 5% to $8.1 billion. Intel Foundry, the contract-manufacturing unit, reported $6.7 billion in revenue, up 58%, and an operating loss of $1.85 billion, narrower than the $2.32 billion loss a year earlier.

Chief Executive Lip-Bu Tan said in the release: "Our immediate priority is to unlock additional supply to meet extraordinary demand for our Xeon family." Chief Financial Officer David Zinsner said revenue, gross margin and earnings all exceeded Intel's guidance and described the strongest data-centre revenue growth in 15 years.

Why is Intel short of server chips?

Demand for Xeon processors now exceeds what Intel can ship. HotHardware reported that Intel cited an industry-wide shortage of advanced organic substrates used in its EMIB packaging, which limits how quickly it can ramp output. Hardware Busters, summarising the earnings call, wrote that easing the substrate constraint will take time.

Intel is also moving wafer capacity. Hardware Busters reported that Zinsner answered "The answer is yes" when asked whether some capacity on the Intel 18A process would shift away from consumer chips such as Panther Lake toward data-centre wafers. The site tied the move to converting part of Intel's 18A capacity in Oregon to Intel 3, the node behind the Xeon 6 line. Intel has not said how many wafers are affected, and Tan called the Panther Lake 18A ramp a success, so the shift is a reallocation rather than a retreat.

HotHardware reported that Granite Rapids is now Intel's largest server CPU family and that Diamond Rapids is on track to ramp in 2027.

What is wrong with the PC business?

The PC chip business is being squeezed by memory prices. Hardware Busters reported that rising DRAM and NAND costs raise laptop prices, which cuts buyer demand and OEM orders. HotHardware said Intel blames much of the client weakness on soaring memory prices, component shortages and strained IT budgets, and that PC makers are trimming inventories.

Intel's outlook is blunt. Zinsner said, in the line quoted in the release, "we see the PC slowdown continuing at least through the first half of next year." HotHardware reported that Intel expects industry PC unit shipments to fall about 12% in 2026 and about 10% in 2027, and that client revenue will drop by more than 20% sequentially in the fourth quarter. Tan said the next few quarters "will be challenging for the PC market," according to Hardware Busters.

One bright spot sits at the low end. Hardware Busters reported that Wildcat Lake, Intel's budget 18A client chip, grew units about 70% sequentially and is sold out, as buyers trade down. HotHardware added that 18A client CPUs rose from under 5% of client revenue in the first quarter to nearly one-third.

How did the guidance compare with expectations?

Intel's fourth-quarter guidance missed on every headline line. According to the release, revenue is forecast at $15.0 billion to $16.0 billion, GAAP gross margin at 37.1% and non-GAAP gross margin at 38.0%, with non-GAAP earnings per share of $0.25. Money Morning put analyst expectations at about $17 billion in revenue and low-to-mid $0.40s in earnings per share for the quarter.

The same article reported that a "Fab 28 incident" is expected to reduce fourth-quarter revenue by about $300 million and gross margin by about 200 basis points, mostly in 10-nanometre server products. It did not describe the incident or its location, and the other sources read for this article did not mention it. The cause and duration of any production disruption therefore remain unconfirmed.

Money Morning said Intel's stock had roughly doubled in 2026 before the report. Other outlets cite different drop sizes depending on timing, so this article uses only the roughly 20% figure.

Why does the split matter for the chip industry?

The quarter shows that AI-era server demand is lifting a company that, a year ago, was best known for losing share in PCs. Intel's data-centre unit produced more operating income, $3.04 billion, than the PC unit's $2.29 billion, and it grew at a rate the company says it has not seen in 15 years.

The cost is flexibility. Memory prices are outside Intel's control, and moving 18A capacity toward Xeon means the company is betting that server demand will outlast the PC downturn. HotHardware noted that management reported 18A yields improving "to industry-standard levels ahead of our internal projections," which supports that bet. If memory prices ease, Hardware Busters said Intel could shift capacity back, but nobody on the call suggested that would happen soon.

What we don't know yet

Several material points remain open. Intel has not disclosed how many wafers are moving from client to server products, or how fast the substrate shortage will ease. The scope of the Fab 28 disruption is described in only one source read for this article. Intel's guidance bundles the PC outlook, the supply limit and the Fab 28 hit, so the share of the fall due to each is unclear.

What happens next?

Intel's next test is the fourth-quarter report, when the company must show Xeon supply improving while client revenue drops by more than 20% from the third quarter. Investors and customers will watch two numbers: how much of the 78% growth is volume limited by supply, and how long PC makers keep trimming inventory while memory stays dear.