Intel Corporation’s stock took a significant hit after the company posted a mixed earnings report for the fourth quarter of 2025, paired with a weaker-than-expected forecast for the first quarter of 2026. Despite beating analysts’ earnings projections for the period, the chipmaker’s struggles with supply shortages and disappointing guidance led to a sharp drop in share value.
Weak Q1 Outlook Causes Stock Decline
On January 22, 2026, Intel released its much-anticipated earnings for Q4 2025, revealing adjusted earnings per share (EPS) of $0.15, surpassing Wall Street’s estimate of $0.08. Revenue of $13.7 billion also exceeded expectations, though it represented a 4% decline compared to the same period last year. The company, however, reported a net loss of $0.6 billion, far worse than the expected $0.3 billion loss. Gross margin also tumbled to 37.9%, down from 45.7% in Q4 2024.
Despite these mixed results, Intel’s guidance for the first quarter of 2026 sparked concerns among investors. The company projected revenue between $11.7 billion and $12.7 billion, with the midpoint falling below Wall Street’s estimate of $12.5 billion. The gross margin forecast of 34.5% also missed expectations, sending shares plummeting by 6.5% in after-hours trading and as much as 13% by the end of the session.
AI Demand and Supply Shortages: Key Challenges for Intel
Intel’s CEO, Lip-Bu Tan, addressed the company’s challenges during the earnings call, expressing confidence in the long-term demand for CPUs driven by artificial intelligence (AI). Tan emphasized the importance of Intel’s new 18A process technology, which represents a significant step in the company’s bid to reclaim market leadership. “Our conviction in the essential role of CPUs in the AI era continues to grow,” Tan remarked, focusing on the company’s efforts to address supply constraints and meet rising customer demand.
However, Intel’s CFO, David Zinsner, acknowledged that the supply shortages would likely reach their peak in Q1 2026, with a forecasted improvement in the second quarter. Despite these issues, the company expressed optimism about the underlying demand for Intel’s products, particularly in the data center and AI markets, which remain strong.
The impact of manufacturing delays has been a key obstacle in Intel’s efforts to turn around its fortunes, despite the promising launch of new products. Intel’s Data Center and AI (DCAI) division, which posted a 9% year-over-year revenue increase to $4.7 billion, was a bright spot. The company’s Foundry business also showed growth, with revenue rising by 4% to $4.5 billion. However, the Client Computing Group, which handles Intel’s core PC chips, saw a 7% drop in revenue to $8.2 billion.
On the cost side, Intel made some progress, cutting operating expenses by 14% to $4.0 billion and reducing research and development costs by 17% to $3.2 billion. Free cash flow rose 52%, reaching $4.3 billion, though the company’s effective tax rate soared to an unsustainable 198.5%, further exacerbating its financial challenges.
As Wall Street digests Intel’s performance, analysts are divided in their outlook. Some, including KeyBanc and Seaport Research, upgraded their ratings, while others, like RBC Capital, urged caution due to Intel’s uncertain manufacturing trajectory. The company’s lofty price-to-earnings (P/E) ratio of 80x forward earnings leaves little room for error, especially as it grapples with weak margins and ongoing supply woes.
Intel’s future performance will depend on its ability to address these manufacturing challenges, capitalize on the AI boom, and meet the growing demand for high-performance computing. Investors will be closely watching Intel’s progress on these fronts, with the company’s next steps in its foundry strategy and efforts to alleviate CPU shortages set to play a pivotal role in its recovery.
