Intel delivered a solid quarter on Thursday, but its guidance underscored how heavily it still depends on the struggling PC market, sending shares sharply lower after hours. We’re not joining the sell-off just yet. Revenue in the third quarter increased 21% year over year to $16.513 billion, edging out the LSEG-compiled consensus estimate of $16.496 billion. Non-GAAP earnings per share (EPS) more than doubled to 52 cents, beating the LSEG estimate of 40 cents. INTC YTD mountain Intel 1-year return Bottom line Despite data center demand and improvements at its foundry still pointing to a solid long-term outlook, analysts will need to revise estimates downward for several quarters, as weakness in the consumer electronics market will persist well into 2027. Why not bail on the stock? This is the reset. Further downside is certainly possible, but selling now won’t erase the losses we’ve taken. Looking ahead to next year, we see the data center business continuing to grow as agentic AI workloads drive demand for CPUs, foundry operations continue to improve, and the PC market bottoms out. As a result, the risk/reward profile dictates we stick with it, even if the outlook suggests this probably isn’t the best use case for new money into year-end. We’ll be more optimistic once the downward estimate revisions come through, the stock finds its bottom, and most importantly, when we see evidence that the inventory flush currently underway in the PC market is coming to an end. There is no doubt that upside is capped for the near future. As a result, our rating is currently under review, and we are slashing our price target to $100. Commentary Memory prices are through the roof. Data center builders are all too happy to pay up and can raise capital by issuing debt or selling equity. Consumers can’t, putting immense pressure on the PC market. Consumer demand isn’t driving the surge in memory prices. The issue is that PC makers and the data center cohort rely on the same manufacturing capacity, and there simply isn’t enough of it to meet demand from both. For example, Apple has raised prices on some Macs and iPads to offset higher memory costs. Its devices don’t use the same high-bandwidth memory sought by the likes of Amazon, Microsoft, Alphabet, and Meta Platforms, but Apple is competing with those data center players for the limited capacity at memory supplier fabs (think Samsung, Micron, and SK Hynix). “The industry continues to navigate one of the most significant supply shortages in history driven by the unprecedented demand for superintelligence,” CEO Lip-Bu Tan said on the conference call. While Intel has done a lot to expand its data center business — and benefited immensely from the need for its CPUs to power agentic AI workloads — it remains heavily exposed to the PC market. Sales in the unit fell 5% year-over-year, but it still accounts for more than half of the revenue of Intel’s products group (CCPG + DCAI) and about 43% of Intel Products’…
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