Intel earned net income of $4.3 billion on revenues of $18.3 billion in the quarter ending September 30, disappointing Wall Street: Overall, income and revenues both fell, and Intel’s datacenter business is starting to drop off.

“Our teams delivered solid third-quarter results that exceeded our expectations despite pandemic-related impacts in significant portions of the business,” Intel CEO Bob Swan said in a prepared statement. “Nine months into 2020, we’re forecasting growth and another record year, even as we manage through massive demand shifts and economic uncertainty. We remain confident in our strategy and the long-term value we’ll create as we deliver leadership products and aim to win share in a diversified market fueled by data and the rise of AI, 5G networks and edge computing.”

The problem for Intel is that the massive gains it made in the previous two quarters thanks to the COVID-19 pandemic and the resulting boom in PC sales has collapsed: Intel’s revenues grew over 20 percent year-over-year (YOY) in the past two quarters, but revenues fell 5 percent this past quarter.

“We saw much stronger PC demand in the consumer and education side [in this quarter], which tends to be the more entry-level for PC notebooks,” Intel CFO George Davis explained of the drop-off. Those computers are much less expensive and much less profitable, for both Intel and the PC makers that sell them. Overall, Intel’s PC business grew just 1 percent in the quarter to $9.8 billion.

More troubling is Intel’s datacenter business: The microprocessor giant says that demand for datacenter chipsets plummeted 47 percent in the quarter after two quarters of massive, COVID-19-based growth. And that business reported revenues of just $5.9 billion, a drop of over 7 percent.

Also problematic, Intel faces more and better competition than it has in decades. Qualcomm and Apple now control the market for chipsets used in personal computing devices, and AMD is eating away at Intel’s PC and datacenter businesses with solid and affordable new offerings. Longer-term, ARM-based chipsets from Qualcomm and others also threaten to steal away Intel’s datacenter business. And NVIDIA—which is purchasing Arm Holdings—this year surpassed Intel as the largest American semiconductor maker, at least by market valuation.

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