Intel puts Kiryat Gat explosion cost at $600 million

By Elena Vasquez

Intel estimates the Kiryat Gat fab explosion will cost about $600 million in lost revenue across Q4 2026 and Q1 2027, the company said on its Q3 earnings call. The incident forced a two-week shutdown and will weigh on fourth-quarter shipments of 10-nanometer server chips.

What happened at Kiryat Gat?

The explosion earlier this month at Intel's Kiryat Gat fabrication facility killed two workers and seriously injured a third. Police suspect a gas cylinder malfunctioned while workers unloaded it from a truck; Israel's Fire and Rescue Services reported a nitrogen trifluoride leak after the blast.

Nitrogen trifluoride, or NF3, is a toxic gas primarily used in semiconductor manufacturing to clean and etch silicon wafers. The gas is non-flammable but can cause severe harm if inhaled. CEO Lip-Bu Tan described the incident as unfortunate and tragic.

How much will the blast cost?

At the time of the call, Intel hoped to restart production by the end of that week. Engineers assessed which wafers remained usable and which required scrapping.

“I think the current thinking is that we will have about a $300 million impact to the fourth quarter. That is likely to be similar in the first quarter,” CFO David Zinsner said. Zinsner called the estimate preliminary. The $600 million total therefore splits into two roughly equal quarterly charges.

What did Q3's numbers show?

• Group revenue: $16.5 billion, up 21% year over year.
• Data center and AI revenue: $7.3 billion, up 17% sequentially and 78% year over year.
• DCAI operating profit: $3 billion, equal to 42% of segment revenue and up about $600 million sequentially.
• Intel Foundry revenue: $6.7 billion, up 16% sequentially.
• External foundry revenue: $411 million, up $118 million sequentially.
• Intel Foundry operating loss: $1.9 billion, down from $2.1 billion in Q2 2026.

Growth in data center and AI spanned hyperscale, enterprise and neocloud customers. Purpose-built silicon revenue rose more than 50% sequentially and more than doubled year over year.

Demand for DCAI products continued to exceed available supply. Zinsner attributed DCAI's roughly $600 million sequential profit increase to higher revenue and lower operating expenses.

Granite Rapids is now the largest product family in Intel's server portfolio. The company continues to increase output from its Ireland fabrication facility.

Zinsner attributed Intel Foundry's sequential revenue increase to better-than-expected growth on Intel 3 and Intel 18A.

What progress did Intel make on 18A?

Tan said yields increased again on Intel 3 and Intel 18A, with 18A improving at a double-digit rate. Wafer output on both nodes exceeded expectations.

Intel 18A-P remains on schedule for a year-end launch across the internal product portfolio. External customer engagement continues to build, and Tan said Intel is working with a couple of highly strategic customers.

He expressed increasing confidence that 18A-P would be an attractive node for external foundry customers.

Can 14A secure outside business?

Tan said Intel will advance 14A only with a meaningful external customer able to drive acceptable returns on deployed capital. He remained “highly encouraged by the progress we are making with multiple potential customers on 14A.”

In April, Tesla CEO Elon Musk said the EV maker planned to use Intel's 14A process at its $20 billion TeraFab project in Austin, Texas. Tan did not name the customers on the call, but said Intel could announce a couple during the next two quarters.

Why did Intel's shares fall?

A year-on-year revenue decline in the client computing and physical AI group, combined with a weak fourth-quarter outlook, sent Intel shares down around 20% in extended trading. Zinsner guided Q4 revenue to a range of $15 billion to $16 billion.

Despite the explosion's expected financial impact, Intel still expects 2027 to be a growth year. Zinsner also expects the DCAI segment's Q3 momentum to continue into Q4 and beyond.

Can Intel ease its supply constraints?

The near-term constraint lies in the first half of 2027. Intel discussed adding 40% more substrate capacity, but much of that capacity will not reach Intel until the second half.

Tan traveled to Japan to meet substrate vendors and help secure Intel's allocated and appropriate supply. Zinsner said Intel was as well positioned as any supplier to deliver, although supply will remain tight next quarter and through the first half of 2027. He expects healthy data-center growth after that period.