Intel's data center sales jump 78% on AI demand, but a weak outlook sends the stock down 28.6%

Intel reported third-quarter revenue of $16.5 billion on October 29, up 21% from $13.7 billion a year earlier, with non-GAAP earnings of $0.52 per share against $0.23 a year ago. Its Data Center and AI segment grew 78% to $7.3 billion, and Intel Foundry revenue rose 58% to $6.7 billion, while the client computing group fell 5% to $8.1 billion. The fourth-quarter outlook was the problem: Intel guided to revenue of $15 billion to $16 billion, non-GAAP gross margin of 38.0% and non-GAAP earnings of $0.25 per share. The stock fell 28.6% on Friday, October 30, while the S&P 500 lost 1.8%, according to Trefis.

Demand Intel cannot meet

CEO Lip-Bu Tan said in the release that "demand for our CPUs remains robust" and that Intel is working to unlock more supply for its Xeon server family. On the call, per Investing.com, he said the "server CPU TAM, largely driven by agentic workloads, could increase as much as five times from where it is today." Management said shortages of wafers and substrates will likely remain a limiting factor through the first half of 2027, and that Intel's 2027 market share will depend largely on how much it can supply.

The guidance includes about $300 million of lost fourth-quarter revenue and roughly 200 basis points of gross margin pressure from the shutdown of Intel's Fab 28 plant in Israel, according to CFO David Zinsner. Intel expects client computing revenue to fall more than 20% from the third quarter, citing industry-wide memory shortages and softer demand, and Zinsner said: "we see the PC slowdown continuing at least through the first half of next year." Intel spent $4.2 billion on capital equipment in the quarter.

Why it matters

The useful detail for a business is where AI demand is landing. Agents call tools, run code and move data, and that work runs on general-purpose server processors as well as GPUs. Intel is telling investors it cannot build those chips fast enough, and that the memory shortage feeding AI data centers is also cutting into PCs. For a company buying hardware, that points to longer lead times and firmer prices on servers and laptops for at least the next two quarters. If you plan to run agent workloads on your own infrastructure or have a laptop refresh coming, get quotes and delivery dates early, and include hardware in the cost of each AI workflow rather than counting model spend alone.