Intel shares slump on weak Q4 guidance, ongoing PC slowdown

What happened

Intel reported third-quarter adjusted earnings per share of $0.52 on revenue of $16.51bn. It guided fourth-quarter adjusted earnings per share to $0.25 on revenue of $15bn to $16bn, well below analyst expectations.

Confirmed

Global impact / market context

The weak fourth-quarter guidance signals Intel expects lower sales and profit than analysts anticipated, which means future earnings may disappoint investors. The sharp share price drop shows investors are repricing Intel's stock to reflect reduced revenue expectations and a slower recovery in its personal computer business.

Analyst inference

Intel's client computing division, which supplies chips for personal computers, saw revenue fall 5% year-on-year to $8.1bn, while global PC shipments dropped 4% in the second quarter amid higher component costs. This suggests weaker demand for personal computers is weighing on Intel's core business.

Analyst inference

What to watch

1. Intel finance chief David Zinsner said the PC downturn will likely continue at least through the first half of next year, so watch for further updates on personal computer demand and component costs. Confirmed
2. Intel said it would keep investing disciplinedly in capacity and working capital to support future growth, so watch whether these spending plans are maintained or scaled back if revenue stays weak. Proposed
3. The explosion at an Israeli fabrication plant, which Intel said will reduce revenue by around $600m over two quarters, could affect supply and costs, so watch for details on production recovery and any insurance or repair expenses. Analyst inference

Evidence

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