Intel’s Cautious Forecast Dampens Investor Sentiment Despite Solid Earnings

Intel US4581401001

Intel Corporation delivered a robust fourth-quarter performance, yet its forward guidance has unsettled the market. While the chipmaker surpassed its own targets, a disappointing outlook for the coming quarter, which fell short of Wall Street's expectations, has applied pressure to its shares. The central issue is a supply constraint hitting precisely where demand is strongest.

For Q4 2025, Intel's revenue reached $13.7 billion, marking the fifth consecutive quarter it has exceeded its own guidance. Profitability also beat forecasts, with non-GAAP earnings per share coming in at $0.15, significantly above the $0.08 projected in October. The non-GAAP gross margin stood at 37.9%, again outperforming expectations.

CFO David Zinsner attributed the improved margin primarily to higher revenue and reduced inventory reserves. However, headwinds emerged from a higher mix of outsourced client products and the early ramp-up costs associated with the Intel 18A technology for the Core Ultra Series 3 launch.

For the full fiscal year 2025, Intel reported revenue of $52.9 billion, roughly flat year-over-year, and non-GAAP EPS of $0.42, a notable recovery from a loss of $0.13 per share in 2024. Operating cash flow was $9.7 billion, and the company ended the year with $37.4 billion in cash and short-term investments. Intel also confirmed the completion of NVIDIA's planned $5 billion investment during the quarter.

Supply Shortages Constrain High-Demand Areas

The catalyst for the negative market reaction was the first-quarter 2026 forecast. Intel anticipates revenue between $11.7 billion and $12.7 billion (midpoint: $12.2 billion), below the $12.51 billion analyst consensus compiled by LSEG. The company expects adjusted EPS to be approximately break-even, whereas analysts had, on average, forecast a profit of $0.05 per share.

This cautious stance persists despite soaring demand, particularly in AI data centers. Management cited supply and capacity limitations as the cause. CEO Lip-Bu Tan openly acknowledged short-term disappointment due to an inability to fully meet demand, compounded by depleted inventory buffers. Furthermore, a wafer mix shift toward server products, initiated in Q3 2025, will only materialize as finished goods late in Q1 2026. Zinsner stated these internal constraints will be most acute in the first quarter, with improvement expected from Q2 onward.

Diverging Segment Performance with AI Highlights

Segment results for Q4 presented a mixed picture:

• Client Computing Group (CCG): Revenue of $8.2 billion, a 7% decline year-over-year.
• Data Center & AI (DCAI): Revenue of $4.7 billion, representing 9% growth.
• Intel Foundry: Revenue of $4.5 billion, up 4%.

The Data Center and AI unit was a clear standout. Management noted that "AI PC" unit sales grew 16% sequentially. Additionally, the custom ASIC business expanded by over 50% in 2025, reaching an annualized revenue run rate exceeding $1 billion.

On the technology front, Intel emphasized it is already shipping products based on its Intel 18A manufacturing process. The Core Ultra Series 3 was featured in over 200 notebook designs at CES. Tan cautioned that while yields are on plan, they remain below his personal standards. The stock closed Friday's session at $47.31.

Looking ahead to 2026, Intel provided several financial targets, including approximately $16 billion in non-GAAP operating expenses, capital expenditures that are slightly down to flat (weighted toward the first half), positive adjusted free cash flow, and the repayment of $2.5 billion in maturing debt. Management also set clear profitability goals, targeting a 40% gross margin in the near term and explicitly labeling the Q1 forecast of 34.5% as unacceptable. The company plans to hold an Investor Day in Santa Clara in the second half of 2026.

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