Intel Shares Plunge as Supply Constraints Overshadow Strong Earnings

Intel US4581401001

Intel's latest financial results presented a stark contradiction. The chipmaker reported fourth-quarter 2025 figures that surpassed Wall Street's forecasts, yet its stock suffered a dramatic sell-off, shedding over 15% of its value in a single day. This decline erased approximately $33 billion in market capitalization, a reaction driven entirely by a disappointing near-term outlook that has exposed critical production challenges.

For Q4 2025, Intel posted revenue of $13.67 billion, beating the consensus estimate of $13.37 billion. Earnings per share came in at $0.15, nearly double the $0.08 analysts had projected. However, investor focus swiftly shifted to the company's forecast for the first quarter of 2026. Management anticipates revenue in the range of $11.7 billion to $12.7 billion, which falls below the analyst expectation of $12.6 billion. Furthermore, the projected gross margin of 34.5% is a significant drop from the anticipated 36.5%.

The core issue, as explained by CEO Lip-Bu Tan on the earnings call, is a severe capacity shortfall. Intel is grappling with bottlenecks in advanced packaging technologies and component supplies, which are severely hampering its ability to manufacture server and AI chips. In essence, while demand for these key products is robust, the company cannot fulfill it. Analysts from TD Cowen and Bernstein have characterized the situation as a "capacity miscalculation," forcing Intel to prioritize server products at the expense of other business segments.

Wall Street Adjusts Its Stance

The market's response was immediate and severe. Bernstein reaffirmed its "Market Perform" rating on Intel stock but attached a price target of $36, well below the trading level even after the steep decline. The average analyst price target currently stands at $44.10. Separate valuation models, including a Discounted Cash Flow analysis from Simply Wall St, suggest the shares may still be overvalued by as much as 65% following the drop, implying a fair value closer to $27.

Despite the gloomy sentiment, not all major investors retreated. Institutional activity showed pockets of confidence; PFG Investments increased its stake by 17.4% in the third quarter, while Mn Services Vermogensbeheer expanded its position by 1.2%.

Regaining Trust Becomes the Paramount Challenge

Intel now faces a pressing credibility problem. Its impressive 84% rally throughout 2025 was fueled by investor optimism for an AI-driven turnaround. That narrative has now been seriously undermined. The path to restoring market confidence is clear: the company must demonstrate tangible progress in resolving its production constraints. Until it can prove not only its ability to secure orders but also to deliver on them, share price volatility is likely to persist. The coming quarters will be critical in determining whether Intel can translate potential into reliable execution.