Intel (INTC) experienced a steep sell-off on Friday after the chipmaker delivered first-quarter guidance that fell short of Wall Street expectations, fueling worries about whether its long-promised turnaround can gain traction fast enough to satisfy investors. The pullback came despite better-than-expected fourth-quarter results, highlighting how sensitive sentiment remains to near-term execution risks.
Shares dropped into double-digit percentage losses as investors focused on Intel’s admission that supply constraints are preventing it from fully meeting demand — particularly for chips used in AI data centers. The disappointment is a reversal after a powerful rally that had carried the stock to multi-year highs on optimism around its manufacturing revival and strategic importance to U.S. chip policy.
Guidance Miss Raises Questions About Near-Term Momentum
Intel forecast first-quarter revenue below consensus estimates and said earnings would be roughly breakeven, undercutting expectations that improving demand would translate quickly into financial upside. Management attributed the cautious outlook largely to supply shortages, especially in server CPUs, which are in high demand as data centers expand AI infrastructure.
Executives stated that customer demand remains strong, but acknowledged that production limitations will cap revenue in the near term. The company expects these constraints to be most pronounced in the current quarter before easing later in the year — a timeline that investors appeared reluctant to wait out after the stock’s steep run-up.
Q4 Results Show Stabilization, but Not Acceleration
The fourth quarter showed that Intel’s core business is stabilizing. Earnings slightly exceeded expectations, and revenue came in above forecasts despite a year-over-year decline. Management also highlighted double-digit growth in AI-related businesses, suggesting Intel is regaining relevance in workloads tied to artificial intelligence.
Still, those gains were not enough to offset broader concerns about competitiveness. Intel continues to face pressure from rivals that are more tightly aligned with the AI boom, particularly in accelerators and leading-edge manufacturing. For many investors, the question is not whether Intel is improving — but whether it is improving fast enough.
Manufacturing Ambitions Weigh on Margins
A central tension in Intel’s story remains the cost of rebuilding its manufacturing edge. Heavy investment in advanced process nodes such as 18A is essential to the company’s long-term foundry ambitions, but those efforts are weighing on profitability in the near term. Gross margins declined from a year earlier, reflecting both higher production costs and inefficiencies tied to scaling new technologies. While margins came in slightly better than feared, management acknowledged that ongoing investments and component cost pressures could continue to limit upside through 2026.
Foundry Progress Offers Long-Term Promise
Intel’s foundry business is increasingly viewed as a strategic asset, particularly as governments and customers seek alternatives to overseas manufacturing. Revenue from the unit grew year over year, and executives reiterated confidence that improved yields and customer wins will materialize over time. However, the business has yet to secure marquee customers at scale, and yield performance still trails the industry leader. Until Intel demonstrates consistent execution and customer traction, the foundry narrative may struggle to fully offset concerns in its product segments.
Competitive and Cost Pressures Add to Uncertainty
Beyond manufacturing challenges, Intel faces rising costs tied to memory and storage components that are bundled with its processors in servers and PCs. Those increases could dampen system demand and compress margins, particularly if customers delay upgrades or shift to alternative platforms. At the same time, competition from AMD and Arm-based designs continues to intensify, forcing Intel to defend its share while investing heavily in innovation — a difficult balancing act as it works to restore credibility.
Looking Ahead
Intel’s latest results show it's at an inflection point. Demand for its products, particularly in AI-linked workloads, is growing, and progress in manufacturing suggests the long-term strategy is not broken. But near-term constraints, margin pressure, and execution risks remain formidable. Investors will be watching closely for signs that supply bottlenecks ease as promised and that manufacturing improvements translate into customer wins. Until then, Intel’s stock is likely to remain volatile — caught between optimism about its strategic role in the AI era and skepticism over whether its turnaround can deliver results quickly enough to justify the hype.