Intel: A manufacturing crisis that exposed the giant’s weaknesses

Intel’s shares fell by 17% after the publication of results for the fourth quarter of 2025, after the company reported revenue of $13.7 billion, a year-on-year decline of 4%, and a weak outlook for the first quarter of 2026 in the range of $11.7 to $12.7 billion.* This drop is not just market nervousness, but a direct vote by investors on confidence in Intel’s ability to manage the ongoing manufacturing crisis, increase yields in new processes, and translate AI demand into real revenues and profits.[1] 

About the company

Intel Corporation is an American technology company headquartered in Santa Clara, California, and is among the world’s largest semiconductor manufacturers by revenue. It was founded in 1968 and has long played a key role in the development of x86-architecture microprocessors that power personal computers, servers, and data center infrastructure. In 2025, the company achieved revenue of $52.9 billion with flat revenue momentum and a full-year loss of approximately $0.3 billion, while striving to transform into a global player in advanced manufacturing processes for AI and a data-centric economy.1[2]

A crisis that came at the worst possible moment

Intel had strong sentiment behind it, as its shares rose by 84% in 2025 and added another approximately 47% in January 2026, but one earnings day was enough for the mood to turn radically. Although the company beat expectations for the fourth quarter of 2025, it admitted that it cannot deliver enough chips for AI data centers and provided a significantly weaker outlook for the first quarter of 2026, which caused a 17% drop in the stock on the first day after the announcement and erased approximately $31 billion of market value.* Investors thus received a clear signal that Intel is not in a position to quickly monetize the AI boom and that, at the core of the problem, it is no longer demand but manufacturing capacity and internal efficiency.[3]

Manufacturing capacity that is weak

The core of the current crisis is not that the market does not want Intel’s products, but that Intel cannot deliver enough units where demand is strongest. The company openly admits that even with full utilization of its fabs it cannot cover sharply rising demand for server CPUs for AI infrastructure, while the CFO expects supply availability to hit bottom in the first quarter of 2026 and that improvement will come only in the second quarter. Analysts from Jefferies and Oppenheimer point out that underestimating the server cycle and a misjudged demand structure have led to Intel today representing more of a bottleneck than an accelerator for AI customers, which weakens its negotiating position versus hyperscalers and competitors. From the market’s perspective, a paradox thus arises in which high demand for AI-linked processors generates pressure on capacity, but not automatically higher value for shareholders, unless weak manufacturing capacity is removed quickly.3[4]

Failures in the transition to new processes

Intel’s manufacturing crisis has its technical root in the transition to new manufacturing processes, primarily 18A, which was supposed to be the foundation for a return to technology leadership. Market reports say that as recently as mid-2025 the rate of functional chips on 18A was approximately at the 10% level, which is far below the level suitable for mass production, and even though analysts’ estimates at the end of the year counted on an improvement to 50% to 60%, it still is not enough for reliable deliveries to external customers. Management admits that a high share of scrap at the end of the production line and insufficient process efficiency are the main obstacles in the effort to catch up with the competition, which directly translates into a shortage of new processors on the market and a weak outlook for the first quarter of 2026. From an investment perspective, this means that even if Intel’s product roadmap looks ambitious on paper, the ability to convert these plans into volumes of sold chips is significantly limited in the coming quarters by the technical mastery of manufacturing.[5]

Strategic shift toward AI and impacts on the PC segment

In response to the explosion of demand for AI infrastructure, Intel decided to prioritize data centers and AI-ready processors over classic PC chips, which creates tension in the portfolio as well as in the supply chain. The company admitted that it redirected part of its capacity to high-end server products, reducing the availability of chips for mainstream PCs and cheaper segments, which may cause shortages of lower-tier processors and higher prices for end customers in 2026. Analysts warn that these cheaper segments were historically one of the pillars of Intel’s market share, which has been weakening for several years under pressure from AMD and solutions based on the ARM architecture, and any further weakening in the PC segment may deepen the problem of revenue diversification.[1] Part of the story is also a global shortage of memory chips and rising prices for them, which makes laptops more expensive and reduces consumers’ willingness to upgrade, giving the company only limited room to pass higher manufacturing costs into end prices without a negative impact on demand.4,[6]

What the current crisis says about the company’s future

The current situation around Intel shows that a crack has emerged between the story of a return to the top and real performance, which can no longer be covered merely by communicating about a long-term plan. Revenue in the data center and AI segment rose to approximately $4.7 billion and beat expectations, but a weak outlook for 2026, persistent problems with the share of new functional processes, and an inability to fully serve demand for server CPUs reduce the credibility of the entire transformation. At the same time, it holds that if Intel cannot reliably supply its own product lines, it will hardly convince external customers to entrust it with their most important chips. In the coming quarters, it will be decisive to track the shift in the share of functional chips toward around 70% to 80%, the stabilization of supplies for AI data centers, and the maintenance of a relevant presence in the PC segment, because it is precisely this that will determine whether it will be a temporary episode or a turning point in Intel’s position.

Conclusion

The crisis around Intel shows that the shortage of CPUs for AI data centers, tight capacity, and rising component prices are already translating into more expensive servers and PCs, which changes the conditions for the entire computing hardware market. In the following quarters, therefore, what will matter will not be how many times Intel mentions AI and IDM 2.0, but whether it can reverse the current weak manufacturing capacity so that today’s crisis does not become a permanent handicap in the fight for the future infrastructure of the digital economy. [2] 

* Past performance is not a guarantee of future results.

[1,2]  Forward-looking statements are based on assumptions and current expectations that may be inaccurate, or on the current economic environment, which may change. Such statements are not a guarantee of future performance. They include risks and other uncertainties that are difficult to predict. Results may differ materially from the results expressed or implied in any forward-looking statements.

[1] https://www.intc.com/news-events/press-releases/detail/1759/intel-reports-fourth-quarter-and-full-year-2025-financial

[2] https://en.wikipedia.org/wiki/Intel

[3] https://finance.yahoo.com/news/intel-shares-tumble-supply-chain-132557078.html

[4] https://www.networkworld.com/article/4121715/intels-ai-pivot-could-make-lower-end-pcs-scarce-in-2026-2.html

[5] https://en.oninvest.com/article/intel-gave-a-weak-outlook-for-the-quarter-due-to-manufacturing-issues-the-stock-is-down-12

[6] https://www.globalbankingandfinance.com/intel-results-spotlight-turnaround-efforts-ai-data-centers/