Intel Q4 2025 Earnings Summary: AI-Driven Server Demand Offsets Supply Constraints as Turnaround Progresses
A Turnaround in Motion — and a Market That Isn’t Buying It Yet
Intel delivered a solid Q4 finish, exceeding guidance across revenue, gross margin, and EPS despite persistent industry-wide supply constraints. Revenue came in at $13.7 billion, supported by strong momentum in Data Center & AI and networking, while margins benefited from improved execution and lower inventory-related charges. Management emphasized continued progress in operational discipline, balance sheet strengthening, and roadmap execution, framing 2025 as a foundational year in Intel’s multi-year turnaround. However, near-term supply limitations and rising component costs are expected to pressure results in early 2026 before conditions improve later in the year.
Key Financial Highlights
Revenue: $13.7B (above Street expectations of ~$13.4B)
Non-GAAP Gross Margin: 37.9% (≈130 bps above consensus)
Non-GAAP Operating Margin: 8.8% (vs ~6.4% consensus)
Non-GAAP EPS: $0.15 (vs guidance of $0.08)
Operating Cash Flow: $4.3B
Adjusted Free Cash Flow: $2.2B
Cash & Short-Term Investments: $37.4B
Full-Year 2025 Revenue: $52.9B
Full-Year Non-GAAP EPS: $0.42
Business Performance & Operating Trends
Intel Products revenue reached $12.9 billion, reflecting continued strength in server demand offset by constraints in client computing. Data Center & AI (DCAI) revenue rose 15% sequentially and nearly 40% year over year, marking the fastest sequential growth in over a decade. Management noted that demand would have been higher absent supply limitations, underscoring the central role CPUs continue to play in AI infrastructure - particularly as inference-driven workloads expand.
Client Computing Group (CCG) revenue of $8.2 billion declined modestly sequentially, though AI PC unit volumes grew 16%. The launch of Core Ultra Series 3 (Panther Lake) ahead of schedule highlighted improving execution on Intel’s 18A process, with strong early performance reviews and broad OEM adoption. Management emphasized that hybrid AI architectures - splitting workloads between cloud and client - should support a multi-year PC refresh cycle.
Intel’s custom ASIC business emerged as a bright spot, growing more than 50% in 2025 and exiting Q4 with an annualized revenue run rate above $1 billion. This reinforces Intel’s positioning in specialized silicon for AI, networking, and cloud workloads, an area management views as a long-term growth vector.
Intel Foundry & Manufacturing Progress
Intel Foundry posted Q4 revenue of $4.5 billion, up sequentially, driven by higher EUV wafer mix. While the segment recorded a $2.5 billion operating loss due to early Intel 18A ramp costs, management highlighted meaningful milestones: Intel is now shipping revenue products built on 18A - the most advanced process developed and manufactured in the U.S. - with yields improving steadily.
Progress on Intel 14A and advanced packaging (EMIB, EMIB-T) was also highlighted, with customer engagement increasing and decision timelines expected to begin forming in the second half of 2026. While foundry profitability remains a longer-dated objective, management framed current losses as transitional investments tied to scale-up and customer qualification.
Guidance & 2026 Outlook
For Q1 2026, the company guided revenue of $11.7–$12.7 billion, below consensus, reflecting peak internal supply constraints and wafer mix shifts toward server CPUs. Gross margin is expected to trough at approximately 34.5%, with breakeven EPS, before improving sequentially as capacity comes online in Q2 and beyond.
Looking through 2026, management expects:
Improving supply availability beginning in Q2
Above-seasonal revenue growth in the back half of the year
Operating expenses targeted at ~$16B
Positive adjusted free cash flow for the full year
CapEx flat to slightly down, weighted toward the first half
Management reiterated confidence that 2026 will represent a transition year, with Q1 marking the low point for margins and supply.
Here’s Our Take
Intel’s Q4 results reinforce that the operational reset is gaining traction: execution is improving, server demand tied to AI is robust, and financial discipline is restoring flexibility. The company is clearly benefiting from the resurgence of CPU relevance in an AI-driven compute landscape, while early traction in ASICs and advanced packaging adds optionality to the longer-term growth story.
That said, the near-term setup remains challenging. Supply constraints, rising memory prices, and an early-stage foundry ramp are weighing on Q1 expectations, keeping investor sentiment cautious. While management’s outlook for improving conditions later in 2026 is credible, the path to sustained margin expansion and foundry profitability will require continued execution across manufacturing yields, roadmap delivery, and customer adoption. For now, Intel’s trajectory is improving - but proof points in the coming quarters will be critical to solidifying confidence in the turnaround.
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