However, investor enthusiasm quickly waned as Intel’s forward-looking statements painted a cautious picture. The company forecast first-quarter revenue between $11.7 billion and $12.7 billion — the $12.2 billion midpoint fell short of the $12.55 billion forecast — and breakeven adjusted earnings per share, while hoping for $0.05.
Citing severe chip supply bottlenecks that peaked in the first quarter before subsiding in the second quarter and beyond, shares tumbled 14% in premarket trading this morning, erasing much of the recent rally and sending the stock down to around $47 from its close above $54 per share.
Highlights and bleak guidance in the fourth quarter
Diving deeper, Intel’s success in the fourth quarter came from resilient demand in key segments. Data center and AI revenues increased 9% year over year to $4.7 billion, fueled by the rapid expansion of AI infrastructure, hyperscaler needs and the continued appeal of the x86 ecosystem. Custom ASICs experienced growth of over 50% and reached an annual run rate of over $1 billion.
Overall, the quarter marked Intel’s fifth consecutive earnings beat, with non-GAAP gross margins of 37.9% (140 basis points above prior expectations), supported by disciplined spending, lower inventory reserves and positive free cash flow of $2.22 billion – a sharp turnaround from last year’s negative figure.
Still, attention shifted to Intel’s supply problems. CFO David Zinsner explained that industry-wide shortages, combined with Intel’s internal production increases for advanced nodes like Intel 18A, would limit production the most in the first quarter. The company is prioritizing wafer allocation to higher-margin servers and AI products over seasonal PC demand in the Client Computing Group, leading to a more pronounced revenue decline there.
CEO Lip-Bu Tan highlighted aggressive efforts to scale up supply of new AI-focused chips such as Panther Lake, ensuring meaningful improvements from the second quarter amid healthy underlying demand across markets.
Valuation in the wake of the pre-earnings hype
Ahead of earnings, Intel stock rose nearly 50% in 2026, driven by a wave of analyst upgrades from companies highlighting sold-out server CPU capacity for the year, tailwinds from AI demand, foundry progress (with 18A yields steadily rising toward commercial viability), and strategic bets like potential external customer commitments.
This optimism drove shares to multi-year highs above $54, inflating valuations, with a market cap of around $230 billion and a price-to-sales ratio of more than 4. That multiple seems steep for a company still struggling with lackluster profitability, GAAP losses and consecutive sales declines. Trailing price-to-earnings ratios remain high due to compressed earnings, while average analyst price targets before the earnings report hovered around $41 to $45, suggesting overvaluation and a narrow margin for error if execution continues to slip amid persistent supply hurdles.
In short
Despite the high valuation ahead of earnings, Intel continues its turnaround under renewed leadership, with promising traction in AI and data center growth, 18A node ramps and foundry momentum – albeit on shorter timelines due to yield and capacity challenges.
This plunge could tempt investors to buy the dip looking for exposure to AI and domestic manufacturing themes, but caution is still advised. Second-quarter guidance will be key, showing whether management’s view that this is a temporary supply hiccup – with demand intact and margins and chip availability improving – is true, or whether deeper issues will derail the recovery.
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