Intel shares dropped 13% in after-hours trading after the company said it cannot meet demand for server chips used in AI data centers. The chipmaker forecast quarterly revenue between $11.7 billion and $12.7 billion, below the $12.51 billion analyst estimate. Intel also expects adjusted earnings per share to break even in the first quarter, compared with expectations of 5 cents per share.
Factories at Full Capacity Cannot Keep Up
According to Reuters, Intel runs its factories at capacity but still cannot satisfy demand for server central processors that work alongside AI chips. Chief Executive Officer Lip-Bu Tan told analysts he is disappointed the company cannot fully meet market demand. The company was caught off guard by surging demand for these chips, leaving profitable data center sales on the table while new PC chip production squeezes margins.
Finance chief David Zinsner said cloud-computing giants scrambled to upgrade aging chip fleets because of erosion in networking performance. He told Reuters that despite owning its own factories, Intel faces a lag time in changing the types of chips it makes. The company did not manage its factories with the expectation that data center demand would change.
Contract Manufacturing and Recovery Plans
Two Customers Test New Technology
Tan said two customers are evaluating technical details of Intel’s 14A manufacturing technology. This step could lead to creating test chips with it. Intel executives expect to know by the second half of this year whether external customers want to use the technology. The company held off on investing heavily in 14A while waiting for a large customer.
Zinsner said capital expenditure could stay steady, versus previous expectations that it would decline. Intel received major investments last year, including $5 billion from Nvidia, $2 billion from SoftBank, and a U.S. government stake. The company has started shipping new Panther Lake PC chips, the first product made using Intel’s 18A manufacturing technology.
A global shortage of memory chips has boosted prices and made personal computers more expensive. Zinsner expects available supply to be at its lowest levels in the first quarter and improve in the second quarter. Intel shares gained 84% in 2025 after dropping more than 60% in 2024.
