Intel Beats Guidance, But Q1 Supply Woes Overshadow AI Gains

Date of Call: Jan 22, 2026

Financials Results

• Revenue: Q4: $13.7B, at high end of range; Full year: $52.9B, down slightly YOY
• EPS: Q4 non-GAAP: $0.15 vs. guidance of $0.08; Full year non-GAAP: $0.42, up $0.55 YOY
• Gross Margin: Q4 non-GAAP: 37.9%, approximately 140 basis points ahead of guidance; Full year non-GAAP: 36.7%, up 70 basis points YOY

Guidance:

• Q1 revenue forecast: $11.7B to $12.7B, midpoint at $12.2B, reflecting low end of seasonal.
• Q1 gross margin forecast: ~34.5%, down sequentially due to lower revenue and mix.
• Q1 breakeven EPS (non-GAAP).
• 2026 operating expenses target: $16B.
• 2026 CapEx expected flat to down slightly, weighted to first half.
• Positive adjusted free cash flow for full year 2026 planned.
• Full year 2026 revenue expected to improve beginning in Q2 as supply improves.
• Strong growth expected for DCAI in 2026.

Business Commentary:

Revenue Growth and Supply Constraints:

• Intel Corporation reported Q4 revenue of $13.7 billion, at the high end of its guidance range, with non-GAAP gross margin at 37.9% and non-GAAP EPS of $0.15.
• Despite supply constraints that limited their ability to capture all the strength in their markets, the company saw strong growth across all businesses, driven by the AI infrastructure build-out.

Strong Demand in Data Center and AI:

• DCAI revenue was $4.7 billion, up 15% sequentially, marking the fastest sequential growth this decade.
• The growth was due to strong demand for traditional server compute and the essential role of CPUs in AI workloads.

Client Computing and Product Launch:

• Client Computing Group revenue was $8.2 billion, with AIPC units growing 16%.
• The introduction of the Core Ultra Series 3, delivering three SKUs ahead of schedule, and positive performance reviews contributed to the growth.

Foundry Business and Advanced Packaging:

• Intel Foundry delivered revenue of $4.5 billion, up 6.4% sequentially, driven by increased EUV wafer mix.
• The company is making progress in advanced packaging, particularly with EMIB and EMIB-T, which are expected to be significant differentiators.

Financial Outlook and Supply Improvement:

• For Q1 2026, Intel guided revenue in the range of $11.7 billion to $12.7 billion, with non-GAAP gross margin expected at approximately 34.5%.
• Internal supply constraints were most acute in Q1, but the company expects its factory network to improve available supply beginning in Q2.

Sentiment Analysis:

Overall Tone: Positive

• "2025 was a year of solid progress." "We delivered these results despite supply constraints which meaningfully limited our ability to capture all of the strengths in our underwriting markets." "I'm encouraged by my conversation with our customers and partners around the world." "The opportunity ahead is meaningful and significant as AI-driven computing expands all the markets we serve." "We exit 2025 increasingly confident in the long-term sustainability of the end markets we serve."

Q&A:

• Question from Ross Seymore (Deutsche Bank AG, Research Division): In the short term, are the yield improvements and other actions sufficient to address typical seasonality given Q1 is usually the low point? Longer term, when will you loosen CapEx to address structurally higher demand with more internal supply?
  Response: Improving yields and throughput provide good ROI without incremental capital. CapEx is down significantly in space but ramping up tool spending to address supply. For 14A, capacity spend will only unlock after customer commitments are secured in H2 2026 and H1 2027.

• Question from Timothy Arcuri (UBS Investment Bank, Research Division): What is the definition of success for the foundry business, and is the prior goal of being #2 by 2030 still reasonable?
  Response: Success is defined by world-class foundry business, with 14A development on track and IP portfolio building. Heavy customer engagement is ongoing, with firm capacity commitments expected in H2 2026 to drive scale. Advanced packaging revenue is expected to be north of $1B on early opportunities.

• Question from Joseph Moore (Morgan Stanley, Research Division): Can you provide a time frame for Copper Rapids and expectations for market share dynamics while waiting? Also, can you move wafer mix towards data center?
  Response: Laser-focused on 16-channel Diamond Rapids and accelerating Coral Rapids introduction, which will reintroduce multi-threading. Yes, constrained supply means prioritizing internal wafer supply to data center, leading to share adjustments and focusing client production on mid- and high-end.

• Question from Benjamin Reitzes (Melius Research LLC): What does seasonality imply for Q2-Q4 given Q1 is subseasonal? Also, is server demand driven mostly by hyperscaler or enterprise?
  Response: Expect to be better than seasonal through the year as supply improves from Q2. Hyperscaler is very important, with long-term commitment to CPUs and collaboration on silicon, software, and system-level engagements driving momentum.

• Question from Stacy Rasgon (Bernstein Institutional Services LLC, Research Division): Why is data center expected to be down in Q1 given strong demand and prioritization? Why is inventory not in the right place despite having $11.6B in inventory?
  Response: Both segments will be down due to supply constraints; prioritizing data center but still serving client. Inventory was depleted due to a rapid, unexpected increase in data center unit demand that outpaced prior expectations, leaving little finished goods buffer.

• Question from Vivek Arya (BofA Securities, Research Division): When should Intel get credit for external foundry efforts, and what revenue level constitutes success? Also, what is the server CPU TAM in 2026 and how much is x86 vs. ARM?
  Response: External foundry revenue likely measurable in billions, with risk production on 14A in late 2027 and volume in 2028. Demand is largely x86-driven due to upgrade cycles. Supply is expected to improve through the year, with market share dependent on product advancements like Diamond and Coral Rapids.

• Question from Christopher Muse (Cantor Fitzgerald & Co., Research Division): Do you worry lead times will be longer if you wait until late 2026 for equipment? Why not be more aggressive today?
  Response: Aggressively ramping tool purchases and wafer starts on existing nodes (Intel 7, 18A). Holding back 14A capacity until customer commitments are secured to avoid overbuilding. Focused on improving yield and cycle times without significant CapEx first.

• Question from Harlan Sur (JPMorgan Chase & Co): Have customers started test chip designs for 14A, and what is the status of Clearwater Forest and Diamond Rapids?
  Response: Engaging key customers on PDK 0.5 and test chip designs. Clearwater Forest is still supported; focus is on 16-channel Diamond Rapids and accelerating Coral Rapids with multi-threading for performance.

• Question from Aaron Rakers (Wells Fargo Securities, LLC): How are customers reacting to memory constraints and pricing, and how impactful is it to gross margin? Also, what is the progression of the custom ASIC business?
  Response: Memory constraints and pricing are a major industry challenge; careful allocation to customers is key. Memory cost impacts gross margins as it is packaged, but Lunar Lake supply is relatively secure. Custom ASIC business is at a $1B annualized run rate, with a $100B TAM opportunity, driven by demand for purpose-built silicon for AI and networking.

Contradiction Point 1

Supply Shortage Outlook and Resolution Timing

Contradiction on when supply constraints will ease and meet demand.

Are current yield improvements and actions sufficient to address short-term seasonality, and when will CapEx restrictions be loosened to increase internal supply for higher demand? - Ross Seymore (Deutsche Bank AG)

2025Q4: Supply is expected to improve starting in Q2, but constraints will persist through the year. - David Zinsner(CFO)

Does the 2026 demand-supply outlook focus on servers or clients, and how should we compare Q1 trends to normal seasonality? - Christopher Muse (Cantor Fitzgerald & Co.)

2025Q3: Q1 may see the peak of shortages as inventory buffers from Q3/Q4 are depleted. Seasonality may not be bucked in Q1; improvements are expected later in the year. - David Zinsner(CFO)

Contradiction Point 2

Foundry 14A Process Development and Customer Commitment Timeline

Contradiction on the readiness and customer commitment timeline for the 14A foundry node.

When will revenue from external foundry partnerships be recognized, and what metrics define a successful foundry business? - Vivek Arya (BofA Securities)

2025Q4: Customer engagements on 14A are active. The process involves milestones... A firm customer commitment for a specific product and volume is needed before building significant capacity. Risk production is expected in late 2027, with volume production in 2028. - Lip-Bu Tan(CEO)

Do recent collaborations or equity investments boost confidence in the foundry business, or are technical merits driving optimism? - Ross Seymore (Deutsche Bank)

2025Q3: On the 14A node, engagement with multiple customers and improvements in yield, performance, and reliability are noted. - Lip-Bu Tan(CEO)

Contradiction Point 3

Data Center Roadmap and Product Focus

Contradiction on the priority and status of key data center products (Coral Rapids).

What is the status of the Clearwater Forest platform (18A server) and the ramp timing for Diamond Rapids? - Harlan Sur (JPMorgan Chase & Co.)

2025Q4: The focus is on the high-end 16-channel Diamond Rapids. The team is working to accelerate the introduction of Coral Rapids (with multi-threading) based on customer excitement for an earlier launch. - Lip-Bu Tan(CEO)

What's the update on the data center roadmap for Diamond Rapids and Coral Rapids? - Timothy Arcuri (UBS Investment Bank)

2025Q3: Coral Rapids is in the definition stage and will include SMT (multithreading) to drive higher performance. - Lip-Bu Tan(CEO)

Contradiction Point 4

CapEx Levels and Fab Capacity Planning

Conflicting guidance on normalized CapEx levels for 2026.

Are short-term yield improvements and other actions sufficient to address seasonality, and when will CapEx restrictions be loosened to increase internal supply for higher demand? - Ross Seymore (Deutsche Bank AG)

2025Q4: CapEx is being spent more on tools... Supply is expected to improve starting in Q2. - David Zinsner(CFO)

What is the maintenance CapEx level, and how much can gross CapEx be reduced next year, including the possibility of a $5 billion reduction? - Timothy Michael Arcuri (UBS Investment Bank)

2025Q2: A ballpark for normalized/maintenance CapEx is about half of the $18 billion 2025 level, approximately $9 billion. - David A. Zinsner(CFO)

Contradiction Point 5

Timeline and Status of the 14A Process

Inconsistent statements regarding risk production and volume timing for 14A.

When will you recognize revenue from external foundry efforts, and what metrics define a successful foundry business? - Vivek Arya (BofA Securities)

2025Q4: Risk production is expected in late 2027, with volume production in 2028. - Lip-Bu Tan(CEO)

Is the 14A (2029+) timeline correct, and if 14A fails, does the foundry strategy fail, leaving sustainability dependent on internal 18A volume and outsourcing? - Stacy Aaron Rasgon (Sanford C. Bernstein & Co., LLC.)

2025Q2: 14A timing is in the '28/'29 range. - Lip-Bu Tan(CEO)