Intel (NASDAQ: INTC) shares tumbled as much as 16% on Friday after the chipmaker’s first-quarter guidance failed to meet Wall Street expectations, raising concerns about the company’s ability to meet rising demand for AI-related chips.
The semiconductor giant projected first-quarter revenue of $12.2 billion, below the $12.6 billion forecasted by analysts tracked by Bloomberg. Intel also expects earnings per share (EPS) of $0, missing the $0.08 estimate.
Supply Shortages Drive Guidance Miss
John Pitzer, Intel’s corporate vice president of investor relations, attributed the weaker-than-expected outlook to supply constraints.
“Our biggest sort of challenge in the near term is we can’t meet all the demand that our customers are giving us,” Pitzer told Yahoo Finance. “I think our supply constraints are most pronounced in Q1. We’re working aggressively to get more output out of our fabs,” he added, referring to Intel’s semiconductor manufacturing plants.
Despite the first-quarter headwinds, Intel’s fourth-quarter results exceeded expectations. EPS came in at $0.15, up from $0.13 a year earlier and ahead of the $0.09 estimate. Revenue reached $13.7 billion, a 4% decline from the previous year but above the $13.4 billion forecast.
Pitzer highlighted that Intel’s AI-focused businesses grew in double digits during the fourth quarter, both sequentially and year-over-year, signaling strong demand for AI-capable CPUs in data centers.
Competition and Manufacturing Challenges
Intel, the largest U.S.-based manufacturer of leading-edge chips, faces growing competition from AMD (AMD) and Arm (ARM), adding pressure to both its product and manufacturing divisions.
One of the company’s major challenges is the high cost of developing next-generation manufacturing processes, including the 18A and upcoming 14A nodes. While Intel’s adjusted gross margin fell to 37.9% from 42.1% a year earlier, it remained slightly above Wall Street’s 36.5% estimate. CFO David Zinsner warned that rising memory and storage component costs could also limit revenue growth in 2026.
Market Optimism and AI Demand
Despite Friday’s sell-off, some analysts remain bullish on Intel’s long-term turnaround. The recent launch of Panther Lake chips for AI PCs and steady data center demand drove multiple firms, including HSBC and KeyBanc, to raise their ratings. Intel’s stock had surged nearly 12% this month, hitting its highest level in four years on Wednesday.
KeyBanc analyst John Vinh speculated in a note that Intel may have secured Apple (AAPL) as a customer to use its 18A-P process for Mac chips, with potential plans for the upcoming 14A process on low-end smartphone chips. Intel has not officially confirmed a deal with Apple, but Pitzer noted that the company is “actively engaged” with customers regarding 14A, with potential wins expected in the second half of 2026 into early 2027—a timeline echoed by CEO Lip-Bu Tan.
Balancing AI Growth With Manufacturing Limits
Intel’s recent success with AI chips demonstrates the company’s relevance in a market increasingly dominated by demand for high-performance computing. However, supply constraints and the cost of advancing fabrication technology continue to challenge profitability and short-term growth.
Investors now face a dichotomy: strong AI-driven demand and a robust pipeline of next-generation chips versus immediate production limits and rising costs. Intel executives have emphasized that overcoming manufacturing constraints will be key to capitalizing on AI opportunities and meeting customer demand.
As Intel navigates these headwinds, the company remains one of the few U.S.-based players capable of competing at the cutting edge of semiconductor manufacturing, a position strengthened by federal backing and partnerships in AI. Whether it can convert this technological advantage into revenue growth while managing costs will be critical for investors watching the stock in 2026.
