Intel Q3 revenue rises, but PC decline and supply limits hit shares

Intel reported third-quarter revenue of $16.5 billion, up 21 percent year over year, with datacenter and AI products growing 78 percent. PC-related revenue fell, and the company warned that memory shortages and supply constraints will limit its ability to meet demand. Investors sent the shares down 23.7 percent after hours.

PC demand weakens

Intel said revenue for client computing and physical AI products reached $8.1 billion, down 5 percent year over year and 9 percent from the prior quarter. CEO Lip Bu Tan said customers signaled a PC slowdown based on memory prices and availability, while OEM partners are managing inventory to match softer sell-through. He predicted the PC chip market will shrink by 12 percent next year and remain difficult until memory availability and prices normalize. SK Hynix has predicted memory shortages will persist until 2030, and Intel said its biggest business is therefore in trouble.

CPU demand grows

Tan said Intel sees a resurgence in demand for CPUs because customers want computing systems that consume less energy. He said GPUs are better at thinking tasks while deterministic CPUs are more efficient at finding tasks, and that lower energy use matters for agentic AI. He estimated server CPU total addressable market could rise from $40 billion to more than $200 billion over five years, a fivefold increase driven largely by agentic workloads.

Supply limits cash-in

Intel said it may struggle to cash in on that boom in the short and longer term as it struggles to source key supplies such as silicon wafers. CFO Dave Zinsner declined to offer guidance on whether Intel can meet server CPU demand, though he said demand will continue all through next year. He said Intel will likely not fully meet customer requirements and will face a more challenging situation in the first half of the year than in the second half. Intel is shifting production across its fabs and will devote some PC chip production capacity to datacenter products.

Rebuild continues

Tan described his plan to rebuild Intel as a multiyear journey and said the company has made enormous strides in 18 months, including resizing its workforce, eliminating middle management and bureaucracy, streamlining executive ranks and establishing an almost entirely new leadership team. He pointed to progress on manufacturing processes that will bring Intel closer to parity with TSMC, and said an engineering-centric culture has been restored. He also said he was disappointed that Intel was not able to meet strong customer demand this quarter, but remains confident despite near-term challenges including manufacturing supply shortages, the memory crunch and soft PC demand. Intel shares started the day at $92.96, sank to $73 after results, and reached $70.87 in after-hours trading.

Sources: The Register