Intel entered its third-quarter report with momentum behind it. Revenue rose 21% year on year to $16.51 billion, while adjusted earnings of 52 cents a share beat the 40-cent consensus estimate. The strongest engine was data center and AI, where revenue jumped 78% to $7.3 billion as demand grew for CPUs used in agent-style AI systems.¹

But the same AI investment boom that lifted Intel’s server business is also disrupting its core PC franchise. Heavy demand for memory chips has pushed up component costs, prompting PC makers to raise prices and ship fewer machines. Intel’s client computing and physical AI unit saw revenue fall 5% to $8.1 billion, missing expectations; global PC shipments had already dropped 4% in the second quarter, according to Counterpoint Research.¹

Finance chief David Zinsner said the deterioration became clearer late in the summer: “As we got toward the end of August, we just saw some real weakening of the market.” He attributed the slide to memory prices.²

That pressure shaped Intel’s fourth-quarter guidance: revenue of $15 billion to $16 billion, versus analysts’ $17.1 billion expectation, and adjusted earnings of 25 cents a share rather than the expected 43 cents. Zinsner warned that “the PC slowdown” could continue “at least through the first half of next year.”¹ Intel also expects gross margin to fall to 37%, from 43% in the third quarter.²

The outlook was compounded by an explosion at an Israeli fabrication plant, which Intel said would cost roughly $600 million in lost revenue over two quarters after disrupting shipments of 10-nanometer chips.¹ Investors focused on the near-term squeeze: shares fell more than 20% in after-hours trading. Intel’s message is now stark—AI demand is real, but it cannot yet offset the strain on the PC business that still anchors the company.²