Intel Slides as Weak Q4 Outlook Overshadows Data Center Growth

What happened

Intel reported third-quarter sales of $16.5 billion, but its fourth-quarter outlook was weaker. Intel expects revenue of $15 billion to $16 billion. An accident at its Fab 28 plant in Israel may cut fourth-quarter sales by about $300 million, and client computing sales are seen falling more than 20% from the prior quarter.

Confirmed

Global impact / market context

A weaker fourth-quarter outlook means investors expect less revenue and profit than the strong third quarter suggested. Lower sales can reduce cash available for factory investment and shareholder returns. The drop in client computing shows weaker personal computer demand, which matters because that business is a large part of Intel's revenue.

Analyst inference

The article says Intel shares slid because the weak fourth-quarter outlook overshadowed data center growth. Data Center and AI sales were $7.3 billion with $3 billion operating profit, Intel's best sector revenue increase in 15 years. Even so, the factory accident and personal computer weakness pulled expectations down.

Analyst inference

What to watch

1. Watch Intel's fourth-quarter revenue of $15 billion to $16 billion, non-GAAP EPS of $0.25 and gross margin of 38 percent, which means the share of sales left after direct costs. Confirmed
2. Watch whether Fab 28 in Israel recovers, since Intel says the accident may cut fourth-quarter sales by about $300 million and lower gross margin by about 200 basis points, which means hundredths of a percentage point. Proposed
3. Watch whether rising server processor demand, which Intel says may grow the addressable market from roughly $40 billion to more than $200 billion over five years, turns into better free cash flow. Analyst inference

Evidence

• gurufocus.com