Q3 Meets Targets, Q4 Outlook Turns Conservative
Intel reported third-quarter results on the 29th, with adjusted earnings per share of $0.52, beating the market consensus of $0.40. Revenue rose 21% year-on-year to $16.51 billion, broadly in line with expectations. However, the company's outlook for the fourth quarter was relatively conservative, guiding revenue of only $15 billion to $16 billion and earnings per share of about $0.25, with gross margin expected to fall to 38%, well below the third quarter's 44.1%, raising market concerns about future profitability.
Shares Plunge Over 28%, Transformation Tested Again
Hit by the weaker-than-expected guidance, Intel shares plunged 28.58% on the 30th, marking its worst single-day drop since the 1970s and putting renewed pressure on CEO Lip-Bu Tan's ongoing transformation plan. The market worries that amid weak PC demand and rising memory costs, the conservative guidance signals that earnings momentum may be hard to sustain, becoming the key drag on confidence.
Israel Plant Shutdown and Multiple Supply-Chain Pressures
Beyond weak PC market demand and rising memory costs, an accident at its Israel site has also become a source of operating pressure. An explosion occurred in October at Intel's fab in Kiryat Gat, Israel, killing two people and seriously injuring one, forcing the site to shut down for about two weeks. CFO Zinsner said the accident is expected to reduce revenue by about $600 million over the next two quarters, including a reduction of about $300 million in fourth-quarter revenue, with an impact of about 200 basis points on gross margin. In addition, data-center chip production was affected by the shutdown, while tight ABF substrate supply will weigh on fourth-quarter revenue, gross margin and earnings per share.
Analyst Contrasts TSMC, Points to Execution Gap
Semiconductor analyst Andrew Lu wrote in a Facebook post that Intel is currently facing multiple pressures including rising memory prices, weak PC demand, the Israel plant shutdown and ABF substrate shortages. However, he also questioned why TSMC, whose customers face the same weak PC demand and substrate supply issues, did not cut its guidance. He argued that with both companies facing similar industry headwinds but delivering different operating performances, the key may lie in execution, product competitiveness and customer diversification, bluntly saying Intel is just making excuses.