Author: Arsheeya Bajwa and Max A. Cherney
Jan 22 (Reuters) – Intel said on Thursday it was struggling to meet demand for server chips used in artificial intelligence data centers and forecast quarterly revenue and profit below market expectations, sending its shares down 13% in after-hours trading.
The forecast underscores the difficulty Intel faces in predicting the global chip market, with the company’s current products the result of decisions made years ago. The company, whose shares have risen 40% in the past month, recently launched a long-awaited laptop chip as it aims to regain its lead in PCs at a time when the memory chip crunch is expected to curb sales across the industry.
Meanwhile, Intel executives said the company was caught off guard by a surge in demand for server central processing units that power artificial intelligence chips. Even with factories running at full capacity, Intel has been unable to meet demand for chips, making data center profits unavailable, while new PC chips have squeezed its profits.
“In the short term, I’m disappointed that we won’t be able to fully meet market demand,” CEO Lip-Bu Tan told analysts on a conference call.
The company expects revenue in the current quarter to be between $11.7 billion and $12.7 billion, compared with analysts’ average estimate of $12.51 billion, according to data compiled by LSEG.
The company expects first-quarter adjusted earnings per share to break even, compared with its previous forecast of adjusted earnings per share of 5 cents.
Investors and analysts hope that rapid data center construction commissioned by big tech companies to advance their artificial intelligence businesses will boost sales of Intel’s traditional server chips, which are used with Nvidia’s market-leading graphics processing units (GPUs).
The demand for artificial intelligence has surprised some cloud computing giants, which have been scrambling to upgrade aging chipsets due to “eroded network performance,” finance chief David Zinsner told Reuters in an interview.
“They were all kind of caught off guard,” Zinsner said.
On a conference call with investors, Zinsner said that while Intel has its own factories, it faces a lag time in changing the types of chips it produces, and that the company does not anticipate changes in data center demand when it manages its factories.
Two customers engaged in contract manufacturing
After years of missteps left Intel struggling and running out of money in the fast-growing artificial intelligence chip market, Tan devised a turnaround strategy centered on cutting costs and eliminating management while championing a new product roadmap.
Zinsner said Intel has delayed major investments in its next-generation manufacturing process, 14A, while it waits for big customers. Like rivals in the foundry business, Intel is tight-lipped about its customers, but Zinsner said investors will be able to tell when Intel wins customers by looking for a surge in capital spending.
Tan said on the call that two customers are evaluating the technical details of the 14A technology, which could be a step toward creating test chips using the technology. Intel executives said they don’t expect to know until the second half of this year whether outside customers are willing to use the technology.
Zinsner said the company also believes its capital expenditures are likely to remain stable, rather than falling as previously expected.
Intel made a slew of high-profile investments last year — Nvidia invested $5 billion, SoftBank invested $2 billion, and the U.S. government took a stake in the company — and investors are confident the company will be revived.
Michael Schulman, chief investment officer at Running Point Capital, said: “The key insight for investors is that Intel’s turnaround remains supply-constrained rather than demand-constrained; despite competitive products and strong customer interest, this frustrating situation has delayed a financial recovery.”
Tan has also sharply scaled back contract manufacturing ambitions pushed by his predecessor, Pat Gelsinger, to shore up Intel’s balance sheet after capital-intensive expansion eroded profit margins.
After falling more than 60% in 2024, Intel shares rose 84% in 2025, far outpacing the benchmark semiconductor index’s 42% gain.
The company has started shipping its new “Panther Lake” PC chips, the first made with Intel’s make-or-break 18A manufacturing technology, and analysts expect the increase in production to hurt margins.
According to Reuters, only a small fraction of the chips printed with 18A are enough to be made available to customers. Intel said its output, or the number of high-quality chips per silicon wafer, is improving every month. Weak yields also often put pressure on margins.
During the conference call, Tan said 18A production was in line with Intel’s internal plans but was “still below where I would like to be.”
A global shortage of memory chips has pushed up the price of those chips and made personal computers, Intel’s main market, more expensive. Zinsner said in a statement that he expects available supply to be at its lowest level in the first quarter and improve in the second quarter.
Intel has also been losing share in the PC market to AMD and chip designer Arm Holdings.
(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco; Additional reporting by Stephen Nellis and Noel Randewich in San Francisco; Editing by Sayantani Ghosh and Matthew Lewis)
