Intel reported a 21% year-over-year revenue increase to $16.513 billion for the third quarter, surpassing the consensus estimate of $16.496 billion. Non-GAAP earnings per share more than doubled to 52 cents, exceeding the expected 40 cents.
Despite these positive results, the company's guidance revealed ongoing dependence on the weak PC market, which is expected to remain sluggish until at least 2027. Analysts anticipate downward revisions to estimates for several quarters due to this weakness.
Although Intel's data center business is growing, driven by demand for CPUs in AI workloads, the PC segment still constitutes over half of its product group revenue and 43% of operating income. Sales in the PC unit fell 5% year-over-year, contributing to a cautious outlook. CEO Lip-Bu Tan noted that customers are signaling a slowdown in PC demand due to high memory prices and limited availability.
The company faces challenges in ramping up manufacturing capacity, with a $300 million impact expected from a factory shutdown in Israel. Despite these hurdles, Intel's foundry business is improving, and the demand for AI-related products presents significant growth opportunities.
However, analysts suggest that the stock's upside is limited in the near term, leading to a price target reduction to $100 as the market assesses the ongoing inventory issues in the PC sector