Intel Shares Plunge on Supply Chain and Guidance Concerns

Intel US4581401001

Intel's latest quarterly earnings report delivered a jarring mix of results, triggering a dramatic sell-off in its stock. Despite posting figures that exceeded expectations for the final quarter of 2025, the semiconductor giant's disappointing forecast for the current period sent its share price tumbling more than 15% on Friday. This sharp decline erased weeks of gains that had propelled the stock to its highest level in four years.

The company's performance for Q4 2025 was objectively solid. Intel reported revenue of $13.7 billion and adjusted earnings per share (EPS) of $0.15, surpassing Wall Street estimates on both counts. Its data center segment was a particular standout, generating $4.7 billion in sales—over $400 million above consensus forecasts. Management attributed this strength to persistent high demand driven by the ongoing build-out of artificial intelligence infrastructure.

However, the positive fourth-quarter narrative was swiftly undermined by the outlook for Q1 2026. Intel guided for revenue of approximately $12.2 billion, well below the anticipated $12.6 billion. More alarming to investors was the projection for adjusted EPS to be roughly $0.00, a stark contrast to the $0.07 to $0.08 analysts had expected. The company also anticipates a gross margin of only 34.5%, compared to forecasts of 36.5%.

Supply Constraints Take Center Stage

On the post-earnings conference call, CEO Lip-Bu Tan acknowledged Intel's current inability to meet total customer demand. "We are on a multi-year journey. This takes time and determination," Tan stated. John Pitzer, Corporate Vice President for Investor Relations, provided more detail in comments to Yahoo Finance, identifying supply shortages as the primary near-term hurdle. "Our biggest challenge short-term is that we cannot fulfill all of our customers' demand. The supply constraints are most pronounced in the first quarter," he explained.

Chief Financial Officer David Zinsner noted that buffer inventories have been "depleted," exacerbating the situation. Tan further conceded that while production yields are meeting internal plans, they remain "below what I want to achieve." Improving manufacturing yield is set to become a critical lever for the company in 2026.

Market Analysts Express Continued Doubts

The analyst community responded with widespread skepticism. Bernstein suggested Intel had "unfortunately misjudged" the server cycle and was caught "completely flat-footed" on capacity. Jefferies voiced more fundamental concerns, stating, "We still see no clear path forward given further market share losses, lack of an AI strategy, and unclear manufacturing and packaging opportunities."

A potential bright spot remains Intel's foundry business, where it manufactures chips for external clients. CEO Tan confirmed that an opportunity to secure a first major customer for its 14A technology exists "sometime in the second half of this year through the first half of 2027." RBC Capital Markets tempered expectations around this, however, suggesting that meaningful revenue contributions from 14A customers are not realistic until late 2028.

Management Maintains a Cautious Stance

Intel's leadership expects supply constraints to ease over the course of 2026. The management team forecasts sequential growth beginning in the second quarter and double-digit growth for the data center business for the full year. A medium-term gross margin target of 40% remains in place. The pivotal questions now are when Intel will successfully navigate its production challenges and whether it can indeed secure external foundry customers in the second half of 2026.