Intel Q4 2025 Earnings: Supply Constraints Shake AI Chip Demand

Mixed Q4 Performance & Q1 Outlook

• 📊 Intel exceeded Q4 2025 expectations, reporting $13.7 billion in revenue and a non-GAAP EPS of $0.15, significantly beating street estimates.
• ⚠️ Despite the strong Q4, Q1 2026 guidance was a shocker, forecasting revenue between $11.7-$12.7 billion and a non-GAAP EPS of zero, alongside a sharp drop in gross margin to 34.5%.

Supply Chain Bottlenecks

• ⚙️ The primary issue is supply constraint, not lack of demand, particularly for AI-driven server CPUs, which Intel cannot produce fast enough.
• ⏳ Manufacturing challenges stem from a 3-4 month wafer production cycle and a misread of the surging demand for 86 CPUs in the data center market.
• 📉 Intel's buffer inventory is depleted, and they are currently operating "hand-to-mouth" while awaiting new batches of server wafers to complete production in late Q1 2026.

Foundry Strategy & Yields

• 🔬 The new 18A node is shipping with products like Core Ultra Series 3 (Panther Lake), but yields remain below target, leading to high costs per chip and impacting profitability.
• 🚀 For the upcoming 14A foundry node, two potential customers are evaluating the technology, with Intel committing to no major capital expenditure until firm volume commitments are secured by the second half of 2026.
• 🛠️ Intel's capital expenditure strategy for 2026 is shifting from new buildings to investing heavily in manufacturing tools (lithography, etchers) to increase wafer starts on existing nodes (Intel 7, 3, and 18A).

Segment Performance Highlights

• ✨ The Data Center and AI (DCAI) segment was a strong performer, with $4.7 billion in revenue, up 15% sequentially, though constrained by supply.
• 💻 The Client Computing Group (CCG) saw revenue decline by 7% year-over-year, as Intel prioritized limited wafer supply for higher-margin data center chips.
• 📈 Intel's ASIC business reached a $1 billion annualized run rate, indicating success in providing custom silicon solutions and collaborating with hyperscalers.

Future Outlook & Investor Sentiment

• 💬 Management expressed a cautious tone, acknowledging that manufacturing bottlenecks will tie their hands until at least Q2, with a goal to return gross margins above 40%.
• 🎯 An investment strategy, dubbed the "Foundry Flipper," suggests selling short-term puts to capitalize on current pessimism and using the premium to buy long-term LEAPS calls for a potential stock repricing based on 14A customer news in 2H 2026.