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Can Intel Make Enough Chips to Fuel a Turnaround?
Q4 results beat guidance, while supply chain hiccups and depleted inventory cast a long shadow on 2026 outlook; 18A ramps for internal products, while foundry losses continue to mount.
1/26/2026
By the numbers
Q4 Revenue: $13.7 billion
Non-GAAP EPS: $0.15
Non-GAAP Gross Margin: 37.9%
DCAI Sequential Growth: 15% (+9% YoY)
Intel Foundry Operating Loss: $2.5 billion (Q4 revenue was $4.5 billion, up 6.4% sequentially)
Key Highlights
Robust demand for traditional server chips fueled the fastest sequential growth for the data center segment this decade.
The transition to the 18A process node reached a milestone with the first three SKUs of Panther Lake shipping for revenue.
Exhausted inventory buffers and manufacturing lag are creating a significant revenue headwind for the first quarter of 2026.
Management has pivoted to a "data center first" strategy for internal wafer supply to maximize margins amidst capacity shortages.
The News
Intel Q4 earnings exceeded internal guidance, reporting $13.7 billion in revenue and impressive double digit growth in its core segments. However, after reaching multi-year highs, the stock faced immediate pressure as the company set realistic expectations for a 2026 soft start. Intel cited acute supply constraints and a lack of buffer inventory as the primary drivers behind the outlook. CEO Lip-Bu Tan must now deliver accelerated 18A yield improvements in light of a massive unfulfilled demand backlog. You can find more details at Intel’s Investor Relations site.
You can also see our pre-earnings take on the Schwab Network. And our take on the Core Ultra 3 launch here.
Analyst Take
Our analysis of the latest earnings from Santa Clara suggests a company that is finally building products people want, but it simply cannot make enough of them to satisfy the market. For the past year, the narrative around Intel has been about the turnaround and whether the 18A process would actually work. We now have an answer on the technical front: it is working and shipping in the form of Panther Lake. As a result, we’ve moved into the execution part of the story, and here is where it gets sticky. A predictable but still frustrating challenge has emerged during the last quarter. Intel is leaving money on the table because the surging demand for the company’s products inside both AI PCs and traditional servers strained its factory network and the broader supply chain to the breaking point.
The fourth quarter was a "beat and retreat" scenario. Revenue of $13.7 billion and an EPS of $0.15 delivered solid wins. The data center and AI group (DCAI) surged 15% sequentially. So, the enterprise world isn't just buying GPUs; they are finally refreshing the aging server fleets that handle the orchestration and control planes for AI, as well as everything else in the data center. Great components of the execution storyline, yet the market reacted to the Q1 2026 guidance. The company admitted that it burned through its buffer inventory to meet the strong demand in late 2025. Now, they are entering the first quarter with empty cupboards, waiting for new wafers to clear the fab cycle.
What Was Announced
The earnings call served as a roadmap for Intel’s next phase of execution over excuses. Key announcements included:
Panther Lake Launch: Formally known as Core Ultra Series 3, this is the first product line built on the Intel 18A manufacturing process. While they originally committed to one SKU by the end of 2025, they delivered three.
18A Yield Progress: Management confirmed that 18A yields are improving steadily, at roughly 7% to 8% monthly, though they are not yet at the levels Lip-Bu Tan desires.
Server Roadmap Simplification: Intel is focusing resources on the 16-channel Diamond Rapids and plans to accelerate Coral Rapids. Notably, they are reintroducing multi-threading to the data center lineup.
Foundry Milestones: Intel 18-AP 1.0 PDK was delivered, and 14A development remains on track with active customer engagement expected to turn into decisions by the second half of 2026, risk production in 2027 and volume in 2028.
Custom ASIC Momentum: The custom ASIC business hit a run rate of over $1 billion (annualized) in Q4, that's a 50%+ growth rate in 2025.
Looking at the Foundry segment, the $2.5 billion operating loss is a massive number, but it is effectively the price of admission for rebuilding a domestic manufacturing titan. The "de-risking" of 18A is a major milestone, but the financial payoff is still several quarters away. The mix shift toward EUV wafers (which grew from under 1% in 2023 to over 10% in 2025) is a necessary call for long-term margin health.
The supply situation in the client segment (CCG) is particularly telling. Revenue was down 4% quarter over quarter, not because of low demand, but because Intel chose to prioritize its limited internal wafer supply for the higher-margin data center market. This tough manufacturing choice shows that Intel remains in a defensive posture regarding its capacity. While they are leveraging external foundries for client products to bridge the gap, this naturally pressures gross margins.
The broader industry environment also isn't doing Intel any favors. Sure, Intel's own fabs are a bottleneck, but that challenge is compounded by industry-wide shortages of DRAM, NAND, and substrates - all of these supply chain factors are driving up costs. The reality that if 18A yields dramatically ramped tomorrow, which the company isn’t saying will happen, Intel still faces ongoing availability constraints on the components needed to build a full system. That's not just an Intel challenge, it's an industry challenge in the age of AI and the massive client/server refresh cycle anticipated in the coming months.
Ultimately, our take is that Intel is now demonstrating the company’s return to designing and manufacturing leading-edge silicon. Which is a huge win, but in semiconductors a turnaround takes years, and now the ability must be sustained and built upon. So the big question as we move into 2026 is not, "Can they build it?" - they can. Now, Intel must move to answer "Can they execute flawlessly and build enough of it?" Then, “Can they convince other people to trust them to build and package it?” and “Can they do it again with 14A?” The lack of inventory buffer in Q1 2026 is on one hand a self-inflicted wound, but without the company's strategy to meet 2025 targets, we would be asking if they had the capacity to produce at scale. This ‘drain the swamp’ approach to moving the turnaround story represents a bold gamble, and the company will have to double down on the stakes with flawless factory ramp-up and supply chain execution from Q2 onwards.
Looking Ahead
Based on what we are seeing, Intel is now entering a transitional valley where 18As technical success hasn't yet translated into financial stability. The key trend that we will be tracking is the real monthly yield improvement rate for the 18A and 18-AP nodes, as this is the only way for the company to escape its current supply-constrained trap. Our analysis of the market indicates that the prioritization of server wafers over client products will allow AMD to continue nibbling away at PC market share in the short term. Thats not just an Intel issue, look at Micron’s decision to prioritize wafers for HBM over consumer products. The industry is going to allocate sparse wafer supplies where the highest margins live. Going forward HyperFRAME will be looking for how the company performs on securing a major external customer for the 14A node; that will be the true test of the "Trusted U.S. Foundry" vision. When you look at the market as a whole, the announcement today suggests that demand for AI-adjacent infrastructure is still far outstripping the world's ability to manufacture it.
Stephen Sopko | Analyst-in-Residence – Semiconductors & Deep Tech
Stephen Sopko is an Analyst-in-Residence specializing in semiconductors and the deep technologies powering today’s innovation ecosystem. With decades of executive experience spanning Fortune 100, government, and startups, he provides actionable insights by connecting market trends and cutting-edge technologies to business outcomes.
Stephen’s expertise in analyzing the entire buyer’s journey, from technology acquisition to implementation, was refined during his tenure as co-founder and COO of Palisade Compliance, where he helped Fortune 500 clients optimize technology investments. His ability to identify opportunities at the intersection of semiconductors, emerging technologies, and enterprise needs makes him a sought-after advisor to stakeholders navigating complex decisions.