Intel Grows 21%, but Factory Issues and PCs Hit Stocks

Intel closed the third quarter of 2026 with revenue of $16.5 billion, an increase of 21% compared to the same period in 2025, and an adjusted earnings per share of $0.52, according to the report released on Thursday (29). The data center and AI division generated $7.3 billion in revenue, a growth of 78%. However, this did not support the stock prices: shares fell between 14% and 21% in after-hours trading, depending on the timing and source of the quotes.

What impacted Intel was the fourth quarter. The company projects revenue between $15 billion and $16 billion and an adjusted earnings per share of $0.25, less than half of the results just reported. Two factors explain the projection: the shutdown of Fab 28 in Kiryat Gat, Israel, and weakness in the PC market.

The Cost of Kiryat Gat

On October 14, an explosion during the replacement of a nitrogen trifluoride cylinder, a gas used in cleaning manufacturing chambers, killed two workers at Fab 28 and left a third in critical condition. Israeli authorities are investigating the cause, and Intel has stated it is cooperating with the inquiry.

According to David Zinsner, Intel's CFO, the factory shutdown is expected to reduce approximately $300 million from fourth-quarter revenue and 2 percentage points from gross margin. The Israeli facility primarily produces processors for data centers, which is the segment that saw a 78% increase this quarter. Intel is losing volume in the category where demand is strongest.

Lip-Bu Tan, Intel's CEO, summarized the priority in the conference call: to free additional supply to meet the "extraordinary demand" for the Xeon family. This indicates a company with more orders than it can produce in servers, but fewer orders than desired in PCs. Zinsner mentioned that the slowdown in the PC market is expected to continue at least until the first half of 2027.

Real Demand, Short Capacity

The optimistic perspective has its basis. The $7.3 billion in data center revenue indicates that the AI inference surge does not solely depend on GPUs: corporate workloads run on server CPUs, and hyperscalers have returned to purchasing Xeon. The adjusted earnings per share of $0.52 surpassed analysts' estimates.

However, there is also a pessimistic perspective. The foundry division, Intel Foundry, continues to be unprofitable and consumes cash that Intel needs to support capacity expansion in 2027. A fatal accident at a single factory was enough to cut $300 million from revenue and 2 points from margin in one quarter, signaling that the production network has little slack. The guidance of $0.25 per share will be the basis the market uses, not the result of $0.52.

The distinction that matters for corporate buyers is that Intel's current problem is one of supply, not product. This is different from the situation in 2024 when the company was losing server market share due to technological disadvantages.

Who Misses Chips

In Israel, where Intel is one of the largest private employers in the technology sector, Fab 28 is a symbol of the country's industrial investment. The accident sparks a discussion on operational safety that extends beyond Intel: nitrogen trifluoride is used in nearly every semiconductor factory, from Taiwan to South Korea.

In Malaysia, where Intel focuses much of the assembly and testing of its processors in Penang and Kulim, fewer wafers coming from Kiryat Gat translates to lower volume for packaging lines in the fourth quarter and the first quarter of 2027.

In the United States and Europe, the ones affected are server buyers. Manufacturers like Dell, HPE, and Lenovo rely on Xeon for most corporate configurations, and a company referring to "extraordinary demand" without sufficient supply tends to prioritize larger contracts. For the CIO of a bank or insurance company planning to refresh servers for inference workloads in 2027, the message is to expedite orders and consider AMD alternatives or Arm processors from cloud providers.

In Brazil, where much of the corporate servers arrive through these same manufacturers, the impact will be on delivery times, not list prices. Integrators selling infrastructure to the Brazilian financial sector depend on allocation defined in the United States.

The most revealing figure of the quarter is the combination of 78% growth in data center revenue and stock prices falling more than 14%. The market is no longer questioning whether Intel has the product for the era of inference; it is questioning whether it has the factories and cash to deliver it.