Intel stock plunges 14% on weak Q1 guidance, manufacturing troubles
Earnings beat overshadowed by 18A process yield shortfalls and disappointing outlook
Intel shares plunged 14% in Friday trading, wiping out roughly $36bn in market value, as the chipmaker's quarterly earnings beat was overshadowed by disappointing first-quarter guidance and persistent manufacturing challenges with its flagship 18A process technology.
The Santa Clara-based company reported fourth-quarter revenue of $13.7bn, exceeding analyst expectations of $13.4bn, while adjusted earnings per share of $0.15 handily beat the $0.08 consensus estimate. However, investors focused instead on the company's outlook for the current quarter, with management forecasting revenue between $11.7bn and $12.7bn versus the $12.5bn analysts had projected, and adjusted earnings essentially flat at zero compared to expectations of $0.05 to $0.06.
The sharp selloff comes after Intel shares had more than doubled over the past year, as investors bet on chief executive Lip-Bu Tan's ambitious turnaround strategy. Friday's decline reverses a significant portion of those gains, with the stock now trading at roughly $46.75, down from its 52-week high of $54.41 reached earlier this month.
At the heart of investor concerns are manufacturing difficulties with Intel's 18A process node, the company's most advanced manufacturing technology that management has described as critical to competing with Taiwan Semiconductor Manufacturing Co (TSMC) and reclaiming its position as a leading chipmaker. While Intel has begun shipping its first products on the 18A node—Core Ultra Series 3 processors—executives acknowledged that yields remain below internal targets.
"We are seeing yields improving at about 7% per month, but they remain below where I want them to be," Tan said during the company's earnings call, according to analysts present. The early ramp-up of the 18A process contributed to an operating loss of $2.5bn for Intel's foundry business in the fourth quarter, weighing heavily on overall profitability despite the headline earnings beat.
KeyBanc Capital Markets had previously estimated 18A yields at approximately 55% in mid-2025, projecting an improvement to 65-75% by 2026 for commercial competitiveness. While the company remains on track for those targets, the slower-than-expected progress has rattled investors who had grown increasingly optimistic about Intel's manufacturing turnaround following years of missed technological milestones.
Compounding the manufacturing issues are supply shortages that management expects will be at their worst in the current quarter before improving in the second quarter and beyond. "Available supply is expected to be at its lowest level in Q1 2026 before improving in Q2 and beyond," chief financial officer David Zinsner noted in the earnings announcement.
Not all segments showed weakness. Intel's Data Center and AI business demonstrated resilience, growing 9% year-over-year to $4.7bn, as demand for artificial intelligence servers continued to outpace supply. The company also generated $2.2bn in free cash flow during the quarter, providing some financial cushion as it navigates the manufacturing ramp-up.
Analyst reactions were predominantly cautious following the announcement. Of the 45 analysts covering Intel, 33 maintain hold-equivalent ratings, with 4 buy recommendations and 4 sell ratings, according to recent data. The consensus analyst target price of $42.46 sits below the pre-earnings share price, suggesting many on Wall Street had already priced in substantial execution risk.
"The market is increasingly focused on future execution and guidance rather than past results," analysts at XTB noted in a research report. "The weak Q1 outlook and persistent supply constraints highlight the challenges Intel faces in its complex manufacturing turnaround."
The 18A node represents a critical test for Intel's strategy of becoming both a leading chip designer and foundry operator, similar to integrated device manufacturers like Samsung Electronics. Success would enable Intel to manufacture its own most advanced processors while also competing for business from external customers, potentially including Apple, which has reportedly agreed to use Intel's 18A-P process for future iPads and MacBooks.
Friday's selloff reflects growing investor skepticism about whether Intel can execute on this vision without further setbacks. The company had previously delayed several manufacturing nodes in recent years, allowing competitors like AMD and Nvidia to gain market share in key segments while TSMC extended its lead in advanced process manufacturing.
Looking ahead, investors will be watching closely for evidence that 18A yields are accelerating toward the 65-75% range needed for commercial profitability, and whether supply constraints ease as quickly as management has promised. The second quarter guidance update will prove particularly critical, as executives have indicated they expect both yields and supply availability to improve substantially during that period.
Intel's ability to deliver on those expectations will likely determine whether the current stock decline represents a buying opportunity in an ongoing turnaround story, or the beginning of a more profound reassessment of the company's manufacturing capabilities and competitive position in the rapidly evolving semiconductor landscape.