Intel shares tumble on weak Q1 outlook amid supply constraints
Chipmaker's disappointing forecast points to 15% sequential revenue decline as capacity shortages persist
Intel shares declined sharply in after-hours trading Thursday after the semiconductor maker issued disappointing first-quarter guidance, signaling that supply chain constraints will continue to hamper sales through the start of 2026.
The Santa Clara, California-based company reported fourth-quarter revenue of $13.7 billion, a 4% decline from the same period last year, while providing guidance that fell short of Wall Street expectations. For the first quarter of 2026, Intel projects revenue between $11.7 billion and $12.7 billion, representing a potential 15% sequential decline from the fourth quarter.
The forecast fell below analyst expectations of $12.55 billion, according to market data, as Chief Financial Officer David Zinsner indicated that available supply would reach its lowest point in the first quarter. Intel acknowledged industry-wide supply shortages throughout its business, including limitations in its own production capacity and an industry-wide scarcity of substrates.
"We navigated industry-wide supply shortages in Q4 2025, yet still managed to exceed expectations," Intel said in its earnings release, though the outlook suggests those headwinds will intensify before easing.
The fourth-quarter results revealed a mixed picture across Intel's business segments. The Client Computing Group, which produces chips for personal computers, saw revenue decline 7% to $8.2 billion. Meanwhile, the Data Center and AI segment posted a 9% increase to $4.7 billion, while Intel's Foundry business grew 4% to $4.5 billion.
Intel posted a GAAP loss per share of $0.12 for the quarter, though non-GAAP earnings per share of $0.15 exceeded analyst estimates of $0.08. The company's gross margin fell to 36.1% from 39.2% in the year-ago period, reflecting pricing pressure from supply constraints.
To manage the ongoing capacity limitations, Intel has been prioritizing the supply of data center CPUs over consumer chips and plans to adjust pricing for its products, which may lead to increased prices for previous-generation client CPUs. The company is working to increase supply to meet robust customer demand, particularly with the introduction of its first products on Intel 18A technology.
The supply challenges come as Intel is making significant investments in its manufacturing capabilities to compete more effectively against Taiwan Semiconductor Manufacturing Company. Analysts note that Intel could benefit from capacity shortages experienced by TSMC, particularly in advanced packaging solutions like CoWoS, which remain in high demand.
However, concerns persist regarding tightening memory supply, which could impact PC demand and the return on investment for Intel's Foundry business in 2026. Those concerns contributed to a surge in PC shipments in late Q4 2025 as buyers secured inventory ahead of potential price increases.
Analysts remain divided on Intel's prospects. The stock currently carries an average target price of $41.08, below its current trading level near $54, according to market data. Of analysts covering the company, one rate it a strong buy, four recommend buy, thirty-three suggest hold, four advise sell, and three recommend strong sell.
The weak guidance adds pressure on Intel's turnaround strategy, which has relied on expanding its data center and artificial intelligence capabilities to offset slowing demand in its traditional PC business. The company's ability to resolve supply constraints and execute on its new product roadmap will be critical factors for investors in the coming quarters.
Intel's shares are still up significantly from their 52-week low of $17.66, having rallied in recent months on optimism about its manufacturing turnaround and AI opportunities. However, Thursday's disappointing forecast underscores the execution challenges that remain as the company seeks to regain market share from competitors and establish itself as a leading contract chip manufacturer.