Intel Plunges Nearly 17% After Hours as Weak Q4 Margins Overshadow Surging AI Demand

Intel (INTC) shares fell nearly 17% in after-hours trading on Oct. 29 after the chipmaker guided fourth-quarter revenue to $15 billion to $16 billion, below the roughly $17 billion analysts expected, and said gross margin would drop to about 37% as memory costs rise. The outlook interrupted a turnaround that had lifted the stock more than 140% this year, even though third-quarter revenue of $16.5 billion matched estimates and demand for data center processors is running ahead of supply. The shares had also slid more than 20% over the past month.

What Intel reported and guided

For a line-by-line look at the quarter, see our Intel earnings article. At the midpoint, the Q4 revenue guide implies roughly a 6% sequential decline, by our calculation.

PCs and memory costs: a drag into 2027

Management expects the PC market slowdown to persist through at least the first half of 2027, as AI-driven memory shortages and rising component prices reduce shipments and processor demand. The same memory costs are pushing Intel's own gross margin lower.

Data center demand exceeds supply

Surging demand for data center CPUs is exceeding the supply Intel can deliver. The company spent about $4 billion on capital expenditures in the third quarter and plans roughly $20 billion for 2026, while seeking external foundry customers to compete with TSMC. Intel has also said it is increasing investment in equipment, clean-room space and substrates.

Who is funding the turnaround

The offering price matters for sentiment. Shares traded around $92 before the report, already below the $95 August price, and a drop of nearly 17% would put the stock near $76, about 20% below it, by our calculation.

Terafab and the Musk connection

In April, Intel announced it would partner with SpaceX, Tesla and xAI on Terafab, a planned pair of chip factories in Austin, Texas, with one aimed at chips for Tesla vehicles and robots and the other at AI data centers in orbit. Elon Musk has also proposed collaboration between SpaceX and Tesla on the project. The partnership gives Intel a potential large foundry customer, but it remains an early-stage plan.

What it means

The report shows a company with strong demand and heavy backing but limited supply and rising costs. The AI data center business can sell more than Intel can make, while the PC business is being squeezed by the memory shortage. With the stock up more than 140% this year and below its August offering price after the drop, investors are now judging whether capacity additions can lift margins in 2027. See also our Sandisk earnings article on how the same memory shortage is lifting storage suppliers.

Sources: Intel's second-quarter 2026 earnings release (SEC filing) and Intel investor relations materials; third-quarter results, guidance, estimates and after-hours moves are from market data. This is informational, not a recommendation to buy or sell.