Lip-Bu Tan's Intel is down 25% before the bell, and Nasdaq futures are off more than 2%

A good quarter was not enough for Intel. The chipmaker, led by CEO Lip-Bu Tan, was down about 25% in premarket trading on Friday, according to CNBC and Reuters. Investing.com put the drop at 25.3%, to $68.76, and Benzinga showed a decline of about 26%. The stock closed Thursday's regular session at $92.07.

If a move of that size holds through the close, it would erase a large part of a rally that, according to Bloomberg, had more than doubled the stock this year through Thursday's close. It is also landing on a market that was already nervous after Alphabet's 12.6% drop on Thursday.

What Intel reported

The third quarter itself beat expectations. Intel earned an adjusted 52 cents a share on revenue of about $16.5 billion, according to Newsquawk and Benzinga, above the roughly 40 to 41 cents analysts had expected. Its data center and AI business was the bright spot, while revenue in the PC chip unit fell 5% to $8.10 billion, Reuters reported.

The outlook was where things turned. Intel guided fourth-quarter revenue to $15 billion to $16 billion, below the average analyst estimate of about $17.07 billion compiled by LSEG, Reuters said. Bloomberg's tally put the consensus at $17 billion, with some forecasts above $18 billion. Adjusted earnings are expected at 25 cents a share, versus estimates of about 43 to 44 cents.

Reuters reported that Intel expects PC chip revenue to decline in the mid-20% range in the fourth quarter. Management blamed a weak PC market, higher memory prices and limited corporate IT budgets, along with bottlenecks in its own manufacturing.

"The industry continues to navigate one of the most significant supply shortages in the history," Tan said on the earnings call, according to a transcript published by EarningsCall.

The cash question, again

For the second day in a row, the market's sharpest reaction was about cash rather than revenue. Chief Financial Officer Dave Zinsner said Intel does not expect positive free cash flow this year, according to Reuters, and that the company remains on track to spend about $20 billion in capital this year, with spending set to rise sharply in 2027.

Zinsner described 2027 as an "investment year" as Intel tries to raise output to meet demand, particularly for data center products, according to Bloomberg as reported by BusinessLine. Investing.com said management explicitly stated Intel would not generate positive free cash flow next year either.

That puts Intel in the same frame investors applied to Alphabet on Thursday: companies whose spending runs ahead of the cash their businesses bring in are being punished, even when headline results beat.

Chip stocks and the Nasdaq

The selloff spread across semiconductors. Reuters reported Nvidia down about 2.5% before the bell, AMD down about 7% and Broadcom down roughly 4%. TipRanks put the extended-hours declines at about 8% for AMD, 3% for Nvidia and 4% for Broadcom.

Index futures reflected the tech split. At about 4 a.m. ET, Nasdaq 100 futures were down roughly 2.2% and S&P 500 futures about 1%, while Dow futures were close to unchanged, according to Reuters and Investing.com. TipRanks showed similar figures at 5:36 a.m. ET: Nasdaq 100 futures down 2.19%, S&P 500 futures down 0.97% and Dow futures up 0.05%.

Amazon is the other weight on the Nasdaq this morning. Its shares were down about 7% premarket after a third-quarter miss and a signal that capital spending will climb again next year, CNBC and Reuters reported.

Memory maker SanDisk also slipped in extended trading even after beating estimates and announcing an eight-for-one stock split, according to TipRanks and Newsquawk, which cited concerns about cash flow and the durability of AI spending.

Where Thursday left off

The S&P 500 fell 0.30% to 7,720.39 on Thursday, the Dow lost 0.25% to 52,342.56 and the Nasdaq Composite dropped 1.37% to 26,184.72, according to Reuters and CNBC. The small-cap Russell 2000 rose about 1%, a sign that the selling was concentrated in large tech names rather than spread across the market.

What to watch today

• 8:30 a.m. ET: third-quarter employment cost index, a measure of wage and benefit costs the Fed follows closely.
• 9:45 a.m. ET: Chicago PMI for October.
• Before the open: Exxon Mobil, Chevron, AbbVie, AstraZeneca and BP report.
• Regular session: the first full read on Intel and Amazon after their reports.

Premarket prices can move a long way before the 9:30 a.m. ET open, and early indications do not always hold. Today's session will show whether the weakness stays concentrated in chips and cash-hungry AI spenders, as it largely did on Thursday, or spreads further.