Intel's data centre sales jump 78%, but a PC slowdown and a factory blast cloud its next quarter

Every time a company adds an AI assistant to its software, a server somewhere often needs an ordinary processor to organise the work. That quiet demand has become Intel’s best business in years. Customers now want more of its Xeon server chips than Intel can make.

The Intel Q3 2026 earnings, released on 29 October, show that strength and a weaker side together. Sales rose 21% to US$16.5 billion in July to September. Data centre revenue jumped 78%. But PC chip sales fell 5%, and Intel forecast a smaller quarter ahead. Intel stock fell about 20% in after-hours trading.

Intel Q3 2026 earnings: where the US$16.5 billion came from

The Intel Q3 results, filed with the US Securities and Exchange Commission, give these figures:

• Revenue: US$16.5 billion, up from US$13.7 billion a year ago, and above Intel’s own forecast.
• Data Center and AI: US$7.3 billion, up 78%. David Zinsner, Intel’s chief financial officer, called it “our strongest data center revenue growth in 15 years”.
• PC chips (Client Computing and Physical AI): US$8.1 billion, down 5%.
• Intel Foundry, its chip-making arm: US$6.7 billion, up 58%, mostly sales to Intel’s own teams.
• Profit: adjusted earnings were US$0.52 a share, well above the roughly US$0.40 analysts expected. Gross margin, the share of each sales dollar left after making the chips, rose to 44.1% on that adjusted basis.

Official profit fell 18% to US$3.3 billion, but only because one-off gains a year ago, when Intel sold most of its Altera unit, lifted the earlier figure. Intel also has more shares now, after it raised US$23 billion by selling new ones.

A softer quarter ahead, and a blast in Kiryat Gat

For October to December, the Intel guidance is revenue of US$15 billion to US$16 billion and adjusted earnings of US$0.25 a share. Reuters, citing LSEG data, reported that analysts had expected about US$17.1 billion and US$0.43. Intel expects its adjusted gross margin to drop to 38%.

Two things weigh on that forecast. The first is PCs. “We see the PC slowdown continuing at least through the first half of next year,” Zinsner said in the release.

The second is human as well as financial. On 14 October, an explosion at Intel’s factory in Kiryat Gat, Israel, killed two workers and seriously injured a third. Zinsner told Reuters the factory, which mainly makes data centre chips, did not run for two weeks. He estimated the blast would cut fourth-quarter revenue by about US$300 million and gross margin by about 2 percentage points, with a similar revenue hit in early 2027.

Chief executive Lip-Bu Tan said Intel’s “immediate priority is to unlock additional supply to meet extraordinary demand for our Xeon family”.

If you are buying a laptop, or work in chips

For PC buyers, Intel itself expects a soft market until at least mid-2027. Weak demand can bring discounts, though the report says nothing about prices. Other costs are rising: memory chips have become more expensive, and Samsung’s phone and TV business lost money partly for that reason. If you need a laptop now, compare models carefully. If you can wait, watch for offers.

For people who work in chip-making, the Kiryat Gat blast is a sad reminder that these factories carry real risks. Watch for what Intel learns about the cause.

For businesses, AI is reviving demand for ordinary server processors, not only AI accelerators. Supply is tight, so delivery times may matter as much as price.

For savers, Intel sits in many index funds. The shares had risen about 150% this year before the report, so expectations were high. This is not investment advice.

Strong demand, but Intel has to build its way out

On balance, this is a better business than Intel had a year ago. Data centre sales grew at their fastest pace in 15 years, margins improved, and profit beat forecasts. Intel also released an early design kit for its next manufacturing process, 14A, and continues with its planned purchase of Classiq, a quantum software company.

There are real cautions, in our analysis. Intel cannot yet make enough of what customers want, and the factory blast shows how fragile that supply can be. The PC weakness matches what Microsoft’s Windows PC sales showed this week, which suggests a market-wide slowdown, not an Intel-only problem. Meanwhile, rivals such as TSMC posted a record quarter. The likelier outcome is a slower few months while Intel adds capacity, not a reversal of its recovery.

The number to watch in January

Next quarter, watch Intel’s data centre revenue against its shrinking forecast. If server sales keep growing despite the blast and tight supply, the demand story holds. If they stall, the market will want to know whether Intel’s factories, not its customers, are the real ceiling.