Intel’s AI Business Surges 78% as PC Weakness Clouds Recovery

Intel reported a 78% surge in its AI data center processors unit, yet supply issues and declining PC sales hindered its recovery. Revenue for the quarter ending September 26 reached $16.5 billion, up 21% year-over-year. The AI-focused segment generated $7.3 billion, a 78% increase from the previous year. Intel's non-GAAP earnings per share rose to $0.52, up from $0.23, while GAAP earnings dropped 33% to $0.60.

CFO David Zinsner highlighted robust demand for server processors, with revenue increasing by $2.5 billion year-over-year and average selling prices climbing 54%. The company's Xeon processors, designed for general-purpose computing and AI model training, were central to this growth. However, the company faces challenges due to manufacturing disruptions, rising memory costs, and weaker PC demand.

Intel expects to spend $20 billion on manufacturing equipment in 2026, up from the previously forecasted $18 billion. An explosion at Intel's Fab 28 facility in Israel caused a two-week production halt, expected to reduce fourth-quarter revenue by $300 million and gross margin by two percentage points. The PC market remains a significant weakness, with notebook and desktop processor volumes falling 14% year-over-year amid intensifying competition and rising memory prices. Intel expects PC sales to weaken through at least the first half of 2027.