By Ian King, Bloomberg
Intel Corp. shares plunged about 17% after Chief Executive Officer Lip-Bu Tan gave a lackluster forecast and warned that the chipmaker was struggling with manufacturing problems.
First-quarter projections for revenue and earnings both fell well short of Wall Street estimates. And a conference call with analysts, where Tan said it would take “time and resolve” to turn around the company, sent the shares down further. Production snags have hampered the comeback bid, a disappointment for investors who anticipated more of a boost from new products.
“We are on the multiyear journey,” the CEO said.
Intel, the largest maker of personal computer processors, is suffering from low manufacturing yields — the percentage of usable chips coming out of its factories. That’s made it harder to fill orders. The once-dominant semiconductor company has spent years trying to restore its technological edge and recover from market share losses, and this is one more setback.
Demand is “quite strong,” and the company is working hard to fix its manufacturing problems, Tan said in an interview. But Intel used up much of its inventory in the fourth quarter, he said.
“Our yield and production manufacturing are not up to my standards,” Tan said. “We need to improve that.”
Intel shares fell as low as $44.84 on Friday, marking the worst intraday drop since August 2024. The stock had closed at $54.32 on Thursday before the results and had risen about 152% in the last 12 months.
The company won’t have additional supply, particularly of lucrative server computer chips, until the end of the first quarter, Chief Financial Officer Dave Zinsner said on the conference call with analysts. Intel has burned through its stockpiles, and making more products will take several months, he explained. Supply will increase each quarter this year, Zinsner said.
Spending on new plants and equipment in 2026 will be similar to last year, marking a shift from Intel’s recent efforts to cut its budget. But any boost in output from new machinery won’t come until 2027, he said.
Another challenge: Though demand for server chips is solid, the company can’t shift production toward that market too aggressively without hurting its PC customers, Zinsner said.
There’s also concern that higher prices for memory chips will translate into more expensive laptops and weaker demand, Tan said.
Intel had been riding a wave of Wall Street enthusiasm. Investors poured money into the stock in recent months, betting that new products would further bolster finances. Intel also attracted high-profile investments from the US government, Nvidia Corp. and SoftBank Group Corp.
After helping orchestrate the federal government’s investment in August, President Donald Trump recently touted the stock’s gains. The shares had been the best performer on the Philadelphia Stock Exchange Semiconductor Index this month, adding to an 84% surge in 2025.
“There’s been a lot of optimism around Intel potentially turning a corner,” said Matt Bryson, an analyst at Wedbush Securities Inc. “Hearing that yields are difficult, that’s not a great start.”
The US government still has a substantial gain on its Intel stake, according to Bloomberg calculations. After buying in at $20.47 for a total of about $8.9 billion, the US holding is worth roughly $20.4 billion on paper. Technically, taxpayers own only about 274.6 million shares and the rest remain in an escrow account awaiting additional funds from a program through which the government gets secure chip production for military needs. However, all of the shares are accounted for on Intel’s balance sheet, per US Securities and Exchange Commission rules.
At a recent peak for the stock price, that 5.5% stake was worth nearly $15 billion.
Intel’s troubles are a setback for the US government, which is trying to rebuild a vibrant domestic semiconductor industry and has made the American pioneer a cornerstone of that strategy. Intel was the largest beneficiary of the US Chips and Science Act, which earmarked around $52 billion in subsidies to restore American chip production.
The US has had more success with luring foreign chipmakers to the US. Taiwan Semiconductor Manufacturing Co., the leading maker of advanced chips, is planning to expand its operations in Arizona as part of a trade agreement with Washington. TSMC envisions building at least four more chipmaking plants — on top of six already planned — requiring roughly an additional $100 billion of capital, Bloomberg reported this month.
First-quarter revenue will be $11.7 billion to $12.7 billion, Intel said. The midpoint of that range was lower than the $12.6 billion estimated by analysts. The company expects to break even in earnings per share, excluding certain items. Wall Street had projected a profit of 8 cents a share.
In the fourth quarter, revenue fell 4.1% to $13.7 billion. Profit was 15 cents a share, excluding some items. Analysts had estimated sales of $13.4 billion and earnings of 9 cents on average, according to data compiled by Bloomberg.
Gross margin, the percentage of revenue remaining after deducting the cost of production, was 37.9% in the quarter on an adjusted basis. For the current period, that key measure of profitability will contract to 34.5%. When Intel was at the height of its powers, it regularly reported margins north of 60%.
Zinsner said that current margins are “by no means acceptable.”
The Santa Clara, California-based company has a long way to go to restore its former chip-industry glory. Its annual revenue of $53 billion last year was roughly $25 billion shy of the company’s peak revenue, achieved in 2021.
Earlier this month, Intel announced that the Panther Lake design for processors was now available in devices — with Tan touting their capabilities at the CES trade show in Las Vegas. Intel is locked in a race with rival Advanced Micro Devices Inc. and would-be interlopers such as Qualcomm Inc. for leadership in what they hope is a new era of AI-capable personal computers.
Intel’s client computing division had revenue of $8.2 billion last quarter, just missing the average prediction of $8.3 billion. Data center sales were $4.7 billion, compared with a $4.4 billion estimate.
The Intel Foundry Services division — the company’s factory unit — generated revenue of $4.5 billion, a gain of 3.8% from a year earlier. That unit currently relies almost exclusively on Intel product divisions for orders, though it is seeking outside clients.
Ultimately, Intel faces an execution challenge, Tan said in the interview.
“We are laser-focused as a team to improve that,” he said. “To be candid, it’s just our execution needs to improve.”
–With assistance from Ed Ludlow, Katie Greifeld and Romaine Bostick.
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