Intel shares tumble after weak outlook flags manufacturing strain

Intel’s stock slid sharply after the chipmaker warned of production inefficiencies and issued a cautious revenue and earnings forecast, raising fresh concerns about its long-running turnaround and ability to capitalise on strong demand.

Intel Corp. shares suffered a steep fall after the company delivered a downbeat outlook for the first quarter, citing ongoing manufacturing challenges and lower-than-expected financial guidance. The stock dropped as much as 17% after executives acknowledged that production inefficiencies were limiting Intel’s ability to meet market demand.

Chief Executive Officer Lip-Bu Tan told analysts that fixing the company’s operational issues would take “time and resolve,” signalling that Intel’s recovery remains a multi-year effort. The comments, delivered during an earnings call, unsettled investors who had been betting on a faster rebound driven by new product launches.

Manufacturing yields weigh on recovery

At the core of Intel’s struggles are low manufacturing yields, meaning a smaller proportion of usable chips coming out of its factories. This has constrained supply, particularly for high-margin server processors used in data centres, even as demand remains robust.

“Our yield and manufacturing performance are not where they need to be,” Tan said, adding that improvements are a top priority. Intel also revealed that it had largely exhausted its inventory during the December quarter, leaving limited room to absorb supply disruptions in the near term.

Chief Financial Officer Dave Zinsner said additional chip supply would not meaningfully improve until late in the first quarter, with gradual increases expected over the rest of the year. Any major output gains from new equipment investments, however, are unlikely before 2027.

The company also faces a balancing act in allocating capacity between data centre chips and personal computer processors, as prioritising one segment risks hurting the other.

Financial pressure and investor disappointment

Intel forecast first-quarter revenue of $11.7 billion to $12.7 billion, below market expectations, and said adjusted earnings would likely break even. Gross margins are also expected to shrink further, reflecting higher costs and inefficiencies.

The muted outlook comes after a period of strong investor optimism, during which Intel shares had surged on hopes that new processors and government-backed investments would restore its competitive edge. Intel has been a key beneficiary of US efforts to rebuild domestic semiconductor manufacturing under the Chips and Science Act.

Despite solid demand and improving product competitiveness, analysts say execution remains Intel’s biggest challenge. “There was growing belief that Intel was turning a corner,” said one market watcher. “Hearing that manufacturing issues persist is clearly disappointing.”

Intel, once the undisputed leader of the global chip industry, continues to chase a turnaround as it competes with rivals such as AMD and Qualcomm in the emerging AI-PC era. For now, the path back to former glory remains uncertain.