PC market plunges: Can servers support Intel and AMD?

How much has the PC market deteriorated?

Tight memory supply is hitting the PC market. IDC and Gartner data show that PC shipments fell 20% and 22% year on year, respectively, in the third quarter of 2026, markedly worse than the mid-single-digit declines in the second quarter.
Shipments fell 9% and 14% sequentially, respectively, in the third quarter, the worst third-quarter sequential performance in more than 20 years. Bernstein believes changes in the memory market will continue to pressure PC shipments in the fourth quarter.
The chip channel is also under pressure: PC CPU shipments exceeded PC shipments by 10.5% in the second quarter, compared with a gap of about 2% in the first quarter; Bernstein believes the gap could widen further in the second half.

Bernstein sharply cut its PC forecasts for Intel for the fourth quarter and 2027, but stronger server forecasts offset the impact. It expects third-quarter 2026 revenue of 16.6 billion dollars and adjusted earnings per share of 0.49 dollars, above market consensus of 16.5 billion dollars and 0.40 dollars.
Its fourth-quarter revenue and earnings-per-share forecasts are 16.4 billion dollars and 0.41 dollars, broadly in line with its previous forecasts but below consensus of 17.1 billion dollars and 0.43 dollars, mainly because it is more cautious on the client business. Its 2027 revenue forecast rises from 67.7 billion dollars to 73 billion dollars, and its earnings-per-share forecast from 1.81 dollars to 2.19 dollars.
Both shipments and prices have support in the server market. Intel's share of server CPU shipments fell about 1.3 percentage points sequentially last quarter, while its revenue share rose about 1.7 percentage points: an increase in average selling prices from a lower base drove the revenue share higher. Bernstein believes future share will also depend on Intel's capacity expansion on key process nodes.

As the PC market weakens, Intel's client share is also declining. Bernstein also expects that a higher share of output from new process nodes such as Intel 3 and 18A, along with the ramp-up of new businesses such as packaging and ASICs, could weigh on gross margin in 2027.
In foundry, Bernstein is watching the forthcoming 14A 0.9 process design kit, interest in the packaging business and construction progress in Ohio, but for now these developments primarily support the market narrative. Continued increases in capital spending could raise depreciation and delay free-cash-flow breakeven.
Although its view of the company's prospects has improved, Bernstein maintains a market-perform rating on Intel with a price target of 110 dollars.

Bernstein believes AMD's server business is better positioned and that its client business accounts for a smaller share of revenue. AMD has said it expects server sales in the second half of 2026 to grow more than 80% year on year; Bernstein is also optimistic about server CPU growth and the ramp-up of Venice products in 2027.
Bernstein expects AMD's third-quarter revenue of 13.1 billion dollars and adjusted earnings per share of 1.96 dollars, broadly in line with market consensus; its fourth-quarter forecasts are 15.9 billion dollars and 2.56 dollars, below consensus of 16.3 billion dollars and 2.67 dollars, because of weaker PC assumptions.
Its 2027 revenue forecast rises to 93.8 billion dollars, above consensus of 88.7 billion dollars; its earnings-per-share forecast is 15.82 dollars, close to consensus of 15.85 dollars. The revenue advantage does not translate into an equivalent earnings-per-share advantage, partly because Bernstein uses a lower gross-margin assumption.
Bernstein expects AMD's 2027 AI GPU revenue to be 43 billion dollars; its assessment of market forecasts depends on whether MI450 racks can ramp up smoothly. Taking into account AI business expansion and rising memory and HBM prices, it forecasts an overall gross margin of about 54% in 2027, below market consensus of 55.4%; further server strength could provide support. Bernstein rates AMD outperform with a price target of 650 dollars.