Intel (INTC.US) shares plunged more than 28% last Friday after the company reported disappointing third-quarter 2026 results.
The earnings report showed Intel's Q3 revenue rose 21% year-over-year to $16.5 billion, while adjusted earnings per share came in at 52 cents, both exceeding market expectations.
Performance across business segments diverged sharply. The Data Center and AI (DCAI) division emerged as the core growth engine, generating Q3 revenue of $7.318 billion, a surge of 78% year-over-year, with operating income of $3.039 billion and a margin of 41.5%.
Meanwhile, the Client Computing and Physical AI (CCPG) division tied to personal computers delivered weak results, with revenue of $8.097 billion, down 5% year-over-year, and operating profit contracting in tandem.
Intel management stated that demand for server CPUs remains elevated, but supply has become the biggest constraint, and the company is working to ease Xeon processor supply tightness by increasing factory capacity and improving yield rates.
The company also indicated that the PC market slowdown is expected to persist at least through the first half of 2027.
On guidance, Intel forecast fourth-quarter revenue of $15 billion to $16 billion and adjusted earnings per share of 25 cents, both significantly below expectations.
Part of the earnings pressure stems from an explosion at a factory in Israel, which is expected to reduce Q4 revenue by approximately $300 million and lower gross margin by about 200 basis points.
The company also raised its 2026 capital expenditure forecast from $18 billion to $20 billion and expects further increases in 2027.
Following Intel's Q3 earnings release, Wall Street banks JPMorgan and BofA Securities both lowered their price targets on the stock.
JPMorgan maintained its "neutral" rating on Intel while cutting its target price from $85 to $80; BofA Securities downgraded Intel directly from "buy" to "neutral" and slashed its target price from $145 to $100.
However, on the Seeking Alpha platform, several analysts still raised their ratings on Intel.
Analyst Mike Zaccardi, based on technical analysis, argued that this selloff is the most severe for Intel since the 1970s but also constitutes a key buying opportunity.
Mike Zaccardi wrote: "Intel's stock price gain since the start of 2026 is still as high as 87%, and in my view, the current plunge appears to constitute a key technical buying opportunity." He upgraded Intel from "sell" to "buy."
Analyst Bohdan Kucheriavyi also upgraded Intel. He noted that considering the company's revenue grew approximately 21% year-over-year and adjusted earnings per share beat expectations by $0.12, its earnings report "performed quite well."
However, the analyst also wrote: "The problem is that fourth-quarter performance is expected to be significantly weaker than the third quarter." He therefore upgraded the stock from "sell" to "hold."
Analyst Kenio Fontes upgraded Intel based on improved margin of safety after the stock plunge. Kenio ">The Asian Investor also published a similar upgrade report, arguing that after Intel's stock plunge, its valuation "has returned to normal," with the current share price 50% lower than a year ago.
The analyst wrote: "Intel's stock is down about 50% from its high of approximately $142 over the past year, and its valuation has returned to a position closer to the chipmaker's historical average."
However, Quad 7 Capital, head of Seeking Alpha's investment research team, downgraded Intel from "hold" to "sell."
The firm pointed out that Intel's stock price remains at a level that "has fully priced in perfection," but the company's future performance has already begun to show that its elevated market expectations have not been met.
Quad 7 Capital believes: "With full-year capital expenditure (CapEx) still at elevated levels and fourth-quarter profitability rapidly weakening, the stock's currently high valuation premium is becoming increasingly difficult to sustain."
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