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Intel CEO Pat Gelsinger at the company’s corporate headquarters in Silicon Valley in February.

Intel CEO Pat Gelsinger surprised Wall Street on Thursday by laying out the financial cost of his four-year turnaround plan for the company, warning of billions of dollars in additional spending and lower profit margins over the next few years.

While Gelsinger promised a big payback, with sales growing by double-digit percentages, investment analysts were dubious.

Shares fell by nearly 9%, and, on a conference call Thursday afternoon, the CEO found himself defending his strategy again and again.

“We are positioning the company for long-term growth,” Gelsinger insisted. “It is abundantly clear to us that we must invest in our future right now to accelerate past the rest of the industry.”

A longtime Intel executive, Gelsinger returned to the company last winter after a decade running software maker VMware.

Intel had been plagued by a series of technical failures in the years he was away. Gelsinger’s solution is to re-establish the company as the industry leader he knew in the 1980s and ’90s, committing tens of billions of dollars to new factories and renewing investment in Intel’s core engineering. He also plans to turn Intel into a contract manufacturer, making chips for other companies in Intel’s own factories.

Wall Street has been skeptical and has pressed for details of Intel’s spending plans ever since Gelsinger announced his comeback strategy in March. But analysts didn’t expect those numbers Thursday. The company had been planning to describe them at an investor day in November.

Intel said it moved up its disclosure plans because Chief Financial Officer George Davis announced Thursday that he will retire next year. So the company delayed its investor day until February, when it plans to have chosen a new CFO.

Intel said it will spend $25 billion to $28 billion next year on its factories, up from around $19 billion in 2021. And the company said it expects further spending growth in future years as it builds two new factories in Arizona, a new plant somewhere else in the U.S., and one more somewhere in Europe.

Intel doesn’t plan any new Oregon factories in the near future, but Gelsinger says it will build more eventually to support new generations of manufacturing technology.

Gross profit margins, around 57% this year, will fall under 53% for the next two or three years before rebounding.

In exchange, Intel promised annual sales growth of 10% to 12% over the next four years, compared to flat sales in 2021. In fact, Intel has only posted double-digit percentage sales growth once in the last decade.

Pressed on his forecasts, Gelsinger noted that semiconductor demand is enormous right now — more than Intel or other chipmakers can meet. And he said that by improving its technology, Intel can charge more for its chips, and by adding manufacturing capacity it can meet market demand.

“We’ve been woefully short of capacity for a number of years,” Gelsinger said. “Capacity is destiny.”

Investors, already skeptical Gelsinger can pull off the turnaround, blanched at Thursday’s price tag. Shares fell $4.81 in after-hours trading to $51.19.

Also weighing on the stock were uninspiring third-quarter results announced Thursday afternoon and a tepid outlook for the last three months of the year.

Intel said its sales totaled $19.2 billion. That’s up 4.7% from a year earlier and roughly in line with the company’s forecast. Intel said it expects sales will be at roughly the same level in the last quarter.

Profits totaled $6.8 billion, or $1.67 a share. That compares to profits of $4.3 billion, $1.02 a share, in the third quarter of 2020.

But Intel said sales in its PC group, which had been growing rapidly during the pandemic, were down 2% last quarter. Sales to data centers were up 10% but hindered by supply challenges and new regulations on China’s gaming industry, which reduced demand there.

Intel is Oregon’s largest corporate employer, with 21,000 people working at its Washington County campuses. It is hiring hundreds more to staff a $3 billion Hillsboro factory expansion due to open early next year.

While Intel faces “a couple years of pressure,” Gelsinger said Thursday, he insisted the short-term pain will have big payoffs down the road for Intel’s customers and shareholders.

“This is why I came back to the company,” he said. “Choosing to invest.”

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