Intel Shares Fall 23% After Hours as Revenue Losses of $600 Million Forecast
Key Facts
Intel shares fell 23% in extended trading on Thursday after the company said it does not expect positive cash flow during 2026 and pointed to an estimated $600 million in lost revenue over two quarters due to an explosion at its plant in Kiryat Gat. The company's fourth-quarter outlook unsettled investors, as the incident's effects add to supply shortages and pressure in the PC market. Chief Financial Officer David Zinsner said the explosion would reduce fourth-quarter revenue by about $300 million and gross margin by about 200 basis points. Intel said the revenue impact would continue into the first quarter, with a similar effect on revenue expected. In after-hours trading, shares of other chipmakers fell between 1% and 6%, extending the pressure across the sector.
According to EL7 data, Intel shares closed at $92.07 on October 29, compared with $95.53 in the previous session and $93.74 on October 27. These prices are for regular-session closes, while the 23% decline was reported for extended trading. This distinction puts the sharp after-hours drop in a separate context from the stock's movement during the session. The losses came after the company reported third-quarter results and issued its outlook for the following period. The immediate driver of the reaction was concern about the company's ability to meet demand, alongside the cost of continued manufacturing investment.
Chief Executive Lip-Bu Tan said: "I am disappointed that we were unable to meet strong customer demand this quarter." Tan linked near-term challenges to manufacturing supply shortages, memory price pressure and weak PC demand. PC segment figures reflect that pressure: personal-computer chip revenue fell 5% to $8.10 billion in the third quarter. Intel expects this revenue to decline in the fourth quarter by a percentage in the mid-20s. Zinsner said the PC market slowdown would continue at least through the first half of 2027, while the company would continue investing in capacity and working capital to increase supply.
Regarding the Kiryat Gat plant, Reuters reported Zinsner as saying the facility was shut for two weeks after the explosion and that the company plans to ramp up production by the end of the week of October 29. The company estimated the incident would cost it about $600 million in lost revenue over two quarters. The fourth-quarter estimate includes a reduction of about $300 million in revenue and 200 basis points in gross margin, while the revenue impact extends into the first quarter. These losses limit the company's ability to convert demand into sales at a time when it faces manufacturing supply constraints. Memory pressure and a weak PC market further complicate the operating environment described by company officials.
Intel forecast capital spending of $20 billion during 2026, with spending set to rise sharply in 2027, Zinsner told Reuters. That comes as the company does not expect positive cash flow this year, putting spending on expanding manufacturing capacity at the center of the discussion about its cash resources. Zinsner said the PC market slowdown could continue through the first half of next year and that the company would continue investing in capacity and working capital to increase supply. The near-term operational step will be to ramp up production at the Kiryat Gat plant by the end of the week of October 29, after a two-week shutdown. The revenue impact of the explosion, according to the company's estimates, extends into the fourth and first quarters.