Intel’s rally just snapped. After a modest Q4 beat, the chipmaker guided to a flat first quarter and the market did not blink. Shares fell about 17 percent today, wiping out yesterday’s pop and handing investors a sharp reality check.
The beat that did not calm the street
Intel’s fourth quarter landed slightly ahead. Revenue came in near 13.7 billion dollars. Adjusted earnings were 15 cents per share. Gross margin was close to 38 percent. The mix was better where it mattered. Data Center and AI posted stronger margins. The foundry unit, Intel’s chip manufacturing arm, stayed in the red.
That set a constructive tone going into guidance. It was not enough. Management projected first quarter revenue of 11.7 to 12.7 billion dollars, with earnings near zero. That implies a step down to start 2026. Intel also flagged tight supply in server CPUs. The company expects relief by mid year, not today.
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Guidance shock resets near term earnings expectations. Expect volatility until supply improves and foundry losses narrow.
What the market is pricing in
This selloff is about timing and trust. Intel’s turnaround pitch has leaned on two pillars, 18A manufacturing and AI products. The roadmap is intact on paper. The company highlighted new Core Ultra Series 3 mobile chips, code named Panther Lake, at CES this month. These chips aim for better AI features and battery life. That keeps the story alive.
But near term cash flow depends on running the core businesses at higher margin. The data center uptick helps. The foundry drag hurts. Investors want proof that 18A will scale, that external customers will sign on, and that the loss line will shrink. Until then, weak first quarter math pushes out the recovery.
The setup also stung because shares had ripped into earnings. The stock saw double digit gains yesterday. Today’s drop resets that optimism. Price follows numbers, and the next quarter’s numbers are soft.
Supply strain, then a mid year catch up
Intel says server CPU supply is tight now. That can cap shipments into early spring. Cloud and enterprise buyers are spending, but supply limits mute that demand. If constraints ease by mid year, data center growth can re accelerate. The PC side looks steadier, helped by AI PC launches, though it is not the main profit driver yet.
On costs, gross margins near 38 percent show some repair. To support a full turnaround, Intel needs to climb back over the low 40s and hold. That depends on mix, yields, and foundry absorption. The foundry unit is strategic. It also remains loss making. Every quarter of red ink there weighs on the group.
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Bigger picture, real economy stakes
This is not only a stock story. Intel’s build out ties into U.S. industrial policy. Government incentives under the CHIPS Act support new fabs and packaging lines. That money can speed new nodes and keep jobs in Ohio and Arizona. The payoff comes if Intel ships competitive wafers at scale. If it slips, capital stays idle longer and returns lag.
For the sector, supply tightness can shift share in the near term. Rival CPU vendors may pick up wins if Intel cannot deliver units on time. On the manufacturing side, outside foundries keep an edge on leading nodes. Packaging capacity is a swing factor for AI servers across the board. Delays here ripple across cloud capex plans.
Investment view, what I am watching next
Today’s plunge reflects a clean message. The long term case is intact, the near term path is choppy. That creates a trade, and a test of patience.
Key things on my screen next:
- Signs that server CPU supply improves by mid year
- Gross margin tracking back toward the low 40s
- Proof of fresh 18A wins, external and internal
- A smaller foundry loss run rate
If Intel hits these marks, the multiple can expand again. If it misses, the stock can stay range bound. Liquidity is not the issue. Execution is.
For long term investors, pullbacks can be entry points. Size positions, use stops, and expect bumpy quarters.
Shorter term traders should watch the first quarter print for a reset. A clear bottom in estimates, plus any upside on supply, could spark a relief bounce. Options pricing will stay rich after today’s move. Spreads, not naked calls, may fit risk better.
The bottom line
Intel delivered a good fourth quarter. The first quarter guide knocked the wind out of the stock. AI demand and policy support still matter, but they do not erase near term supply strain or foundry losses. The turnaround remains possible. It now needs proof, quarter by quarter, line by line.
