By Anhata Rooprai and Max A. Cherney
Oct 29 (Reuters) - Intel shares plunged some 18% on Thursday after the company disclosed that a factory explosion in Israel will cost it roughly $600 million in lost revenue over two quarters because it has been shut down for about two weeks.
The October explosion at its Kiryat Gat, Israel factory, or fab, killed two and seriously injured one, according to local media reports. Finance chief David Zinsner said Intel planned to start ramping up production at the facility
by the end of this week.
The company said the fourth-quarter revenue outlook would be reduced by roughly $300 million and its gross margins by about 200 basis points, Zinsner said in an interview with Reuters. He said the company expects a similar revenue impact in the first quarter.
Intel is in the process of determining which wafers are salvageable for use and sale after the blast.
"We're still assessing all of the wafers to see which ones are usable and which ones aren't, so we'll have to see whether there is an impact that stretches beyond that," Zinsner said.
The Kiryat Gat fab largely produces data center chips using the company's 10 nanometer manufacturing process.
SLOWING PC SALES
The guidance - hurt further by the explosion-related revenue loss - could test confidence in a stock that has more than doubled this year, as investors weigh ongoing manufacturing constraints and soft PC demand against strong demand for its AI server chips and efforts to revive growth through a costly foundry expansion.
“Looking ahead, we see the PC slowdown continuing at least through the first half of next year," Zinsner said in a statement. "We will continue making disciplined investments in capacity and working capital to increase supply and support future growth.”
The company expects PC revenue to decline in the mid-twenty percentage range for its fourth quarter, Zinsner said in the interview.
Sales in Intel's PC chip business fell 5% to $8.10 billion, missing estimates of $8.98 billion. Investors have been watching for signs that demand has stabilized despite the company's expectation for a soft personal-computing market in the second half of this year and into 2027.
The results also put a spotlight on Intel's funding plans. In August, the company raised $23 billion from an upsized share offering, as it seeks to challenge industry leaders such as TSMC in contract chip manufacturing.
Intel expects fourth-quarter revenue between $15 billion and $16 billion, below analysts' average estimate of $17.07 billion, according to data compiled by LSEG. Adjusted profit is expected to be 25 cents per share, trailing estimates of 43 cents.
The company had also raised its 2026 capital spending forecast to $20 billion from $18 billion in July and said 2027 spending would increase significantly to expand manufacturing capacity.
CEO Lip-Bu Tan has been leading the company's turnaround after it fell behind Nvidia, whose graphics processors dominate the AI boom, with the contract manufacturing, or foundry, business a key part of his revival strategy.
In the third quarter ended September 26, revenue rose 21% to $16.51 billion, largely in line with estimates of $16.50 billion. Adjusted profit came in at 52 cents per share, beating estimates of 40 cents.
(Reporting by Anhata Rooprai in Bengaluru; Editing by Diti Pujara and Jonathan Spicer)
