Navigating Challenges, Seizing Opportunities: Intel's Path Forward
Strong Demand Meets Supply Hurdles in Data Center and AI Segment
For the first time in recent memory, Intel's Data Center and AI (DCAI) division experienced significant demand, surpassing market expectations with $4.7 billion in revenue, well above the $4.43 billion forecast. This surge was primarily driven by strong interest in its Granite Rapids products. However, the company faced considerable challenges in meeting this demand due to buffer inventory depletion and a strategic shift in wafer mix, which pushed back anticipated supply improvements to the end of Q1.
Financial Discrepancies and Future Projections
Despite the robust demand in DCAI, Intel's overall revenue for Q1 2026 is projected to be between $11.7 billion and $12.7 billion, with non-GAAP EPS at $0.00. This falls short of the Street's consensus of $12.51 billion in revenue and $0.05 EPS, indicating that the supply constraints had a noticeable impact on the company's financial outlook. Management openly stated that revenue would have been higher if not for these limitations.
The Persistent Drain of the Foundry Business
Intel's foundry business continues to be a substantial financial burden. In fiscal year 2025, Intel Foundry reported a staggering operating loss of $10.3 billion. External foundry revenue remained minimal, reaching only $222 million in Q4. This segment's ongoing losses underscore the significant investment and time required to establish a competitive and profitable foundry operation, challenging the company's financial resilience.
Market Valuation and Strategic Caution
Despite Intel's current valuation being more attractive than that of TSMC on a forward Enterprise Value-to-Sales (EV/Sales) basis, a cautious stance is warranted. Investors are advised to await concrete evidence of yield and margin improvements in Q2. The performance of the foundry business, along with the resolution of DCAI supply issues, will be critical indicators of Intel's ability to capitalize on market opportunities and enhance profitability in the coming quarters.