Intel Shares Fell Nearly a Quarter Due to Decline in PC Processor Sales

Intel's stock price fell by almost a quarter on Thursday after the company reported a sharp decline in PC processor sales. The trigger was the third-quarter report: revenue rose 21% year-over-year to $16.5 billion, data centers and AI products increased by 78%, and the gross margin was 43%. Revenue was at the upper end of the forecast range of $15.8–16.8 billion, and the margin exceeded expectations by 2 points.

What outweighed

These positive indicators were outweighed by the decline in client computing and physical AI: revenue there was $8.1 billion, down 5% year-over-year and 9% quarter-over-quarter. Intel CEO Lip-Bu Tan stated: "In recent weeks, our clients have started signaling a slowdown in the PC market due to memory prices and availability. Since the beginning of the year, prices for end systems have risen significantly, creating additional pressure on already constrained IT budgets." He added that the pace of correction accelerated over two months, with OEM partners aggressively managing inventories amid weaker sales, and predicted a 12% decline in the PC chip market next year. According to SK Hynix's forecast, the memory shortage will persist until 2030, meaning Intel's core business will be under pressure for a long time.

Bet on CPU

Tan attempted to restore investor confidence by pointing to a "revival in CPU demand" due to the need for energy-efficient systems. "GPUs are good at 'reasoning tasks,' but deterministic CPUs are much more efficient at 'search tasks.' A single reasoning request through a GPU can cost several watt-hours of energy, while a single request on a CPU costs only joules," he said. He estimated that the TAM for server CPUs could grow fivefold over five years—from $40 billion to over $200 billion.

What's missing

During a conference call, managers acknowledged that the company might lack key supplies, including silicon wafers. CFO Dave Zinsner declined to provide a forecast: "CPU demand will be strong throughout next year. We are working on supplies, but we likely won't be able to fully meet customer requirements; the first half of the year will be more challenging than the second." Intel is reallocating production and will dedicate some capacity from PC chips to data centers. Tan called the restructuring a "multi-year journey," noting successes over 18 months—staff reductions, elimination of middle management, a new leadership team—and progress towards parity with TSMC. "I am disappointed that we couldn't meet the strong customer demand this quarter," he admitted.

Market reaction

Intel shares started the day at $92.96, fell to $73 after the results were announced, and reached $70.87 in after-hours trading—a 23.7% drop at the time of publication.