Intel beats and guides December down on memory costs, and the stock falls more than 20% after hours

Intel▼−26.05% — Intel, down 26.05 percent today beat the September quarter and guided December down anyway. Revenue rose 21% to $16.5 billion, adjusted earnings of 52 cents cleared a 40-cent estimate, and data center and AI revenue grew 78% ¹. December is the problem: guidance of $15 billion to $16 billion in revenue↗ against a $17.07 billion consensus, 25 cents of earnings against 43 cents, and gross margin stepping down from 43% to 38% ¹². The shares, up more than 100% this year, fell more than 20% in extended trading ²³.

Memory prices are the mechanism

The cause is the AI buildout's appetite for memory. Samsung, SK Hynix▼−6.47% — SK Hynix, down 6.47 percent today and Micron▼−8.46% — Micron, down 8.46 percent today have shifted wafer capacity into high-bandwidth memory for AI accelerators, which consumes roughly three times the silicon per gigabyte of laptop DRAM ⁴⁵. Contract prices for LPDDR5X, the memory in most laptops, jumped 89% in the second quarter↗, and HP·−8.63% — HP, down 8.63 percent as of its last quote now puts memory at about 35% of a laptop's cost ⁴.

The PC slump runs through at least 2027

PC shipments fell 4% in that quarter, Counterpoint Research estimates, and TrendForce says PC makers have hit the limit of what they will pay for memory↗ ³⁶. Intel projects the PC market down 12% this year and 10% more in 2027, a slump chief financial officer David Zinsner sees running at least through the first half of 2027 ¹³. "In 2027 it is going to be a very severe issue to all of us," chief executive Lip-Bu Tan said ¹.

The shortage pays SK Hynix and charges Intel

A day earlier, SK Hynix posted quarterly revenue of about $78 billion, up 328%↗, with about $62 billion of operating profit, and said its output is effectively sold out through 2029, with shortage projected through 2030 ⁵. Intel pays from both pockets.

Client computing, nearly half its revenue, fell 5% to $8.1 billion, roughly $0.9 billion below estimates ¹². The data center unit left demand unfilled for lack of raw materials and after an October explosion at its Kiryat Gat fab in Israel↗, worth about $300 million of December revenue and 200 basis points of margin ¹².

The AI buildout grew Intel's fastest business by 78% and then billed it through the PC market the buildout itself is shrinking.

Server demand against a shrinking PC base

The bull case is intact: that data center growth was Intel's best in 15 years, foundry revenue rose 58% and is still loss-making, Oracle▼−6.74% — Oracle, down 6.74 percent today committed this week to deploying next-generation Xeon processors, and the demand side is funded by quarters like Amazon's▼−10.62% — Amazon, down 10.62 percent today $75.9 billion of capital spending↗ ³⁷⁸.

Either way, memory costs have moved from supplier earnings into a mega-cap's guidance. Zinsner expects a similar fab hit in the first quarter ². AMD▼−8.67% — AMD, down 8.67 percent today reports next week and Nvidia▼−2.77% — Nvidia, down 2.77 percent today in mid-November ³; the tell is whether server demand outruns a PC base that memory prices keep shrinking ¹.