Is Intel Stock a Buy After Its Post-Earnings Plunge?
Intel (INTC -28.58%) stock dropped about 23% in after-hours trading on Thursday, Oct. 29, after the company released its third-quarter numbers. Shares that closed the regular session at $92.07 traded around $71 by the end of the evening.
The quarter itself was strong. Revenue grew 21% year over year to $16.5 billion. And non-GAAP (adjusted) earnings per share of $0.52 came in far above the $0.38 management had guided for in July, more than doubling from $0.23 a year before.
The outlook was a different story. Intel forecast fourth-quarter revenue at $15.0 billion to $16.0 billion and adjusted earnings per share at $0.25 — under half what it just earned.
Is the drop a chance to buy Intel stock at a lower price? I think the answer has less to do with Intel’s server business, which is booming, than with how long a slump in PC sales lasts.
Image source: Intel.
Data center demand keeps rising
Showing the strength on the server side, revenue in Intel’s data center and AI segment leapt 78% year over year to $7.3 billion in the third quarter. Management said it was the segment’s fastest revenue growth in 15 years.
And it keeps picking up. In the first quarter of 2026, segment revenue rose 22%. By the second quarter, growth had hit 59%.
Intel still couldn’t make enough chips.
“Despite our progress to increase capacity, demand for [data center and AI] products continues to meaningfully exceed available supply,” CFO David Zinsner said in his prepared remarks for the earnings call.
Intel expects segment revenue to grow by a mid-teens percentage in the fourth quarter over the third. Zinsner also said Intel expects the industry to stay short of supply through 2027 and into 2028.
Why did the stock fall?
The problem is on the PC side. Revenue in Intel’s client computing and physical AI group, which sells chips for PCs, fell 5% year over year to $8.1 billion. It dropped 9% from the second quarter.
Management blamed higher memory prices, which have made new PCs pricier, and tight IT budgets. Unfortunately, the next quarter might be even worse. Intel expects revenue in the PC segment to drop over 20% from the third quarter as PC makers draw down their inventory. It now expects PC unit sales industrywide to shrink around 12% in 2026 and about 10% in 2027. Intel’s outlook also reflects an accident earlier this month that shut its Fab 28 plant in Israel for an extended period. The company expects that to lower fourth-quarter revenue by around $300 million and gross margin by about 2 percentage points.
The slump also hits profits. After climbing from 41.8% in the second quarter, Intel’s adjusted gross margin reached 44.1% in the third. For the fourth quarter, though, management is guiding for 38%, mainly because less revenue is being spread across the same fixed plant costs.
The $15.5 billion midpoint of Intel’s revenue outlook would be around 6% under the third quarter’s total. It’d still beat the $13.7 billion Intel posted in the fourth quarter of 2025 by around 13%. But that’d be a sharp slowdown. Year-over-year revenue growth reached 25% in the second quarter, then cooled to 21% in the third.
Intel stock still isn’t cheap after the sell-off
At roughly $71 as of this writing, shares trade at about 33 times the 2027 earnings analysts had expected before Thursday’s results. The price-to-earnings ratio is down from about 43 at Thursday’s close. Of course, the 2027 estimates might fall after a forecast like this.
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Meanwhile, Intel sees 2026 gross capital expenditures of $20 billion, and it said 2027 spending should climb steeply.
And the firm sold $23 billion of new stock in August. Intel now expects about 5.44 billion diluted shares in the fourth quarter, about 20% more than in the third quarter of 2025. Put another way, every dollar of future profit is split more ways.
Yes, the PC slump will likely pass eventually. And if both forecasts hold, Intel’s data center and AI segment may take in more revenue than its PC segment in the fourth quarter. But management said it doesn’t expect a lasting PC recovery until memory supply improves and prices normalize, and it’s already planning for another down year for PC units.
Is Intel stock a buy after the plunge? Not yet, I think.
Sure, the server business is delivering. But around 33 times earnings estimates that could still drop is a high price for a company whose PC sales are set to shrink by over a fifth in one quarter.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.