Intel’s Supply Chain Constraints Overshadow Strong Quarterly Performance

Intel US4581401001

Intel's latest financial results presented a tale of two narratives: a robust finish to the fiscal year tempered immediately by a concerning near-term outlook. The chipmaker's guidance for the current quarter has unsettled the market, citing not weak demand but insufficient manufacturing capacity as the primary headwind. This situation spotlights the company's ongoing challenges in ramping up its advanced 18A chip fabrication technology.

For the fourth quarter of 2025, Intel surpassed Wall Street's expectations. The company reported revenue of $13.7 billion, exceeding the $13.4 billion consensus estimate compiled by LSEG. On an adjusted basis, earnings per share came in at $0.15, significantly higher than the $0.08 analysts had predicted.

However, on a GAAP basis, the quarter resulted in a loss of $0.12 per share. For the full 2025 fiscal year, revenue remained largely stable at $52.9 billion, showing neither a clear decline nor a decisive growth surge compared to the prior year.

A notable shift within the business segments became apparent:
* The Data Center and AI unit saw quarterly revenue grow by 9% to $4.7 billion.
* Conversely, the Client Computing Group, responsible for PC and laptop processors, experienced a 7% decline, generating $8.2 billion.

This divergence underscores where Intel's growth potential currently lies: in data centers and artificial intelligence, while its traditional PC business faces softer conditions.

Guidance Points to Operational Bottlenecks, Not Demand Issues

Despite the strong Q4 performance, investor attention quickly pivoted to the company's forecast for the first quarter of 2026. The projections prompted significant concern:

• Revenue is anticipated to be between $11.7 billion and $12.7 billion, below the LSEG expectation of $12.51 billion.
• Adjusted earnings per share are expected to be approximately zero, compared to an expected $0.05.
• A GAAP loss per share of $0.21 is projected.
• The gross margin is forecast at 32.3% on a GAAP basis and 34.5% on a non-GAAP basis.

CFO David Zinsner clarified that this cautious outlook stems from supply constraints, not lackluster demand. In an interview with CNBC, he stated that Intel currently lacks adequate capacity to meet typical seasonal demand fully. Zinsner indicated that supply conditions should improve beginning in the second quarter.

The core message to the market is therefore mixed: demand exists, but Intel cannot currently fulfill it all—a frustrating scenario for shareholders.

The Critical Path of 18A Manufacturing Technology

Operationally, the new 18A manufacturing process is under intense scrutiny. During the analyst call, CEO Lip-Bu Tan acknowledged that production yields are still below target levels but remain within the company's internal planning framework. He emphasized an "aggressive" effort to expand 18A capacity to serve what he described as "strong customer demand."

This technology directly competes with TSMC's 2-nanometer process and is considered central to Intel's comeback strategy as a contract chip manufacturer. The company noted that 18A "exceeded" expectations in 2025, suggesting the technology is fundamentally ready for high-volume manufacturing, though the ramp-up phase continues to present challenges.

Zinsner also provided a forward-looking comment, suggesting that customer interest for the subsequent 14A generation should become more visible in the second half of 2026. He pointed to anticipated increases in capital expenditures as a key indicator of secured foundry orders.

Stock Volatility Reflects Conflicting Signals

The market's initial reaction was severe. Following the earnings release on January 22, Intel's stock fell by as much as 13% in after-hours trading. The decline extended in the following days, with Forbes reporting a cumulative drop of approximately 21.8%, from $54.32 to around $42.49 by January 27.

A rebound has since occurred. Shares have recovered noticeably from that recent low, currently trading at $46.20. Despite the recent volatility, the stock maintains a substantial gain over a twelve-month horizon, reflecting the enduring high expectations for Intel's AI and foundry strategy.

Strategic Developments Amid Financial Reporting

Alongside the quarterly figures, Intel announced several strategic moves:

• The completion of a $5.0 billion stock sale to NVIDIA, strengthening its balance sheet.
• The appointment of new leadership in IT, government relations, and marketing.
• The addition of Craig H. Barratt, Ph.D., as an independent board member.
• A forecast for 2026 operating expenses of approximately $18.2 billion on a GAAP basis.

These steps reinforce the company's ongoing transformation into a broad-based manufacturing and AI specialist while aiming to maintain financial flexibility.

Looking Ahead: A Transition Year with Defined Milestones

Intel's management views Q1 2026 as an operational low point, characterized by supply shortages and compressed margins. The trajectory for the remainder of the year hinges on three critical factors. First, whether the anticipated supply improvement materializes in Q2 as promised. Second, if 18A production yields rise as planned, thereby boosting profitability. Third, the company's ability to secure visible foundry customers for its 14A technology in the latter half of 2026, which would be signaled by rising capital investments.

This sets the stage for 2026 to be a transitional year for Intel: near-term performance is pressured by operational bottlenecks, but the medium-term path is marked by clear milestones against which the credibility of its turnaround narrative will be measured.