Intel, the chipmaker whose largest investor is the U.S. government, revealed on Thursday how the artificial intelligence boom has become a double-edged sword for its business.
The Silicon Valley pioneer reported that its revenue rose 21 percent to $16.5 billion in its third quarter. That jump from a year earlier, the latest sign of a gradual rebound, reflected furious demand for chips that are particularly useful in managing agent-style A.I. services in data centers.
But Intel also projected revenue and profits below Wall Street expectations for the current quarter, largely because A.I. demands have caused a shortage in memory chips needed to make personal computers. Facing stiff component price increases, PC makers raised their prices and shipped fewer systems, hurting Intel’s big business in selling chips for PCs.
“As we got toward the end of August, we just saw some real weakening of the market,” David Zinsner, Intel’s chief financial officer, said in an interview. “We really attribute it to memory prices.”
With memory issues expected to continue, Intel projected revenue of $15 billion to $16 billion in the fourth quarter, well below Wall Street projections of around $17 billion. It estimated that its closely watched gross profit margin would decline to 37 percent, from 43 percent in the third period.
Intel’s stock plunged 20 percent in after-hours trading after the announcement, before rebounding slightly. The company’s shares, which surged earlier in the year, had slid more than 30 percent since September on industrywide fears of an A.I. spending slowdown.
Still, Intel has proved to be a good bet for the Trump administration, which pressed in August 2025 for a nearly 10 percent stake in the company in exchange for $8.9 billion in federal funding. That stake is worth around $32 billion after the sell-off on Thursday.
Intel has long dominated sales of chips called central processing units, or CPUs, which carry out most calculations in computers. It has struggled to match the growth of companies, such as Nvidia, that make specialized chips called GPUs, which handle most computing chores in A.I. applications.
The situation reversed somewhat lately, as CPUs proved more useful for A.I. chores for agents, which can autonomously perform digital tasks. Intel has struggled to manufacture enough CPUs for the servers needed to handle such applications.
The company shipped more chips in the quarter, which along with higher prices caused revenue in Intel’s data center unit to surge 78 percent from a year earlier to $7.3 billion. Revenue from the unit that includes PC chips declined 5 percent to $8.1 billion.
Net income declined 18 percent to $3.3 billion, largely reflecting a one-time gain in the year-earlier quarter.
Besides the PC issues, Mr. Zinsner said, Intel experienced a manufacturing interruption because of a fire at a factory in Israel. The interruption lasted about two weeks and will require some silicon wafers to be scrapped.
Lip-Bu Tan, Intel’s chief executive, faces other challenges, such as making money from a new business providing manufacturing services to other companies. Revenue in that so-called foundry business rose 58 percent to $6.7 billion in the third period, but customers beyond Intel’s product units accounted for only around $400 million, Mr. Zinsner said.
Intel said it expected to begin attracting more external customers to its chip packaging services and its next production process, called 14A. It is also forging ahead with plans to add factory capacity in Arizona and at a new site in Ohio.
The company’s capital spending — projected at $20 billion for 2026 — is only about a third of that projected by Taiwan Semiconductor Manufacturing Company, the leading foundry. Handel Jones, a longtime market watcher at International Business Strategies, argued that Intel needed to boost its spending to catch up, more than it can afford on its own.
“There is a window for Intel,” Mr. Jones said. “But they have to have external funding.”
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