Intel’s revival hits a bump in the road as its guidance falls short of expectations – News

Updated:

Shares of Intel Corp. nosedived in extended trading today after the company beat expectations in its fourth-quarter financial results but followed up with soft guidance for the current quarter.

The company reported earnings before certain costs such as stock compensation of 15 cents per share, easily beating Wall Street’s expectations of eight cents per share. Revenue fell 4% from a year ago, to $13.7 billion, but that was above the $13.4 billion forecast by analysts. However, its profitability worsened, as it logged a net loss of $600 million, compared with a net loss of just $100 million a year earlier.

For the current quarter, Intel said it’s looking for breakeven earnings-per-share and revenue of between $11.7 billion and $12.7 billion. Both numbers came in below the Street’s forecast, which calls for earnings of five cents per share on sales of $12.51 billion.

Update: The outlook spooked investors, who knocked shares down 17% Friday.

On a conference call with analysts, Intel Chief Financial Officer David Zinsner blamed the lower guidance on the fact that the company is struggling with component supplies, and doesn’t have enough to meet seasonal demand. However, the company is trying to respond by ramping up its production efficiency in order to boost the supply of its products. “Our yields are in-line with our internal plans,” said Intel Chief Executive Lip-Bu Tan (pictured). “They are still below what I want them to be.”

Investors were optimistic about Intel prior to the report. The chipmaker’s stock has been one of the market’s best performers over the last 12 months, gaining 147% over that period. The company’s revival has been driven partly by major investments from the U.S. government, Nvidia Corp. and SoftBank Group Corp., which have all become major shareholders. There is a growing belief that Intel may finally be on the verge of turning the corner after years in the doldrums, thanks to the changes implemented by Tan since he took over in March. In particular, there are reports that Intel might be able to secure a first major customer for its foundry business, which is trying to rival Taiwan Semiconductor Manufacturing Co. by making chips for third-party chipmakers.

Earlier this month, Tan told media that the company’s 18A manufacturing process, which competes with TSMC’s two-nanometer technology, had “over-delivered” last year. His comments implied that the 18A process is mature enough to expand production volume of its first products, including Intel’s own Core Ultra Series 3 central processing units.

“The introduction of our first products on Intel 18A – the most advanced process technology developed and manufactured in the United States – marks an important milestone, and we’re working aggressively to grow supply to meet strong customer demand,” Tan said in prepared remarks earlier today.

Prior to today’s report, KeyBanc analyst John Vinh speculated that Intel could have signed up Apple Inc. as one of the first customers to use its 18A process to make chips for Mac computers. He added that the iPhone maker is also exploring the possibility of using Intel’s upcoming 13A process for low-end smartphone chips.

Intel’s foundry division generated $4.5 billion in sales during the quarter, although most of that stemmed from manufacturing the company’s own chips.

EMarketer analyst Jacob Bourne told News that Intel’s better-than-expected results can be seen as early validation that Intel’s recent turnaround is the result of to more than just stock momentum.

“The bigger picture shows that TSMC’s capacity is stretched thin, and escalating demand for AI infrastructure is creating market opportunities for alternative foundries, like Intel’s,” the analyst said. “With its 18A process now seen as competitive with TSMC’s two-nanometer technology and data center and AI revenue up 9% year-over-year, Intel is finally finding its footing in the AI race, and it’s starting to show up in its financial performance.”

Not everyone has been convinced by Intel’s supposed turnaround, though. Holger Mueller of Constellation Research said it’s hard to find many encouraging signs in the company’s latest quarterly results. “Intel keeps talking about how CPUs have a role to play in the AI world, but it doesn’t seem to be able to translate that into the kind of growth we see with GPUs in AI workloads,” he pointed out. “So if not 2026, when is Intel going to participate in the AI boom?”.

Mueller said the most obvious path for Intel is to show some sort of design win in the AI data center plans of cloud providers, but it has not been able to do so thus far. “The AI-induced server growth necessary to make up for lackluster PC sales has not yet appeared during what is a boom time for the chip industry, and that is an obvious concern for investors,” he added.

There are further concerns for the company, too. One of the most worrying is the sky-high cost of memory chips and storage components, which could impact customer demand for the data center servers and personal computers that utilize Intel’s chips. When questioned about this on the call, Zinsner conceded that higher memory prices “could limit our revenue opportunity” in fiscal 2026.

Those fears were evident in the results from Intel’s Client Computing business, which manufacturers chips for PCs and laptops. Revenue declined 7% from a year ago, to $8.2 billion.

Nonetheless, Intel benefited from strong sales of its latest server chips during the quarter, thanks to increased enterprise spending on artificial intelligence infrastructure. Revenue from Intel’s Data Center and AI segment rose 9% from a year earlier, to $4.7 billion during the quarter. According to Tan, this is evidence that Intel’s CPUs are becoming more critical to systems designed for AI workloads, which cannot be powered by graphics processing units alone.

Despite Friday’s plunge, Intel’s stock has still enjoyed a strong start to 2026 and remains up 47% so far this year.

Photo: Intel