Intel Struggles to Keep Up With AI Data Center Demand

Intel is facing fresh challenges as it works to regain momentum in the fast-moving AI chip market. The company said Thursday it has been unable to fully meet demand for its server processors used in AI data centers, while also forecasting quarterly revenue and profits below Wall Street expectations. The outlook sent Intel shares down about 7% in after-hours trading.

For the current quarter, Intel expects revenue to land between $11.7 billion and $12.7 billion, below analysts’ average estimate of $12.51 billion, according to LSEG data. The company also said it expects adjusted earnings to break even, compared with expectations of roughly 5 cents per share.

Investors have been betting that massive data-center buildouts by Big Tech aimed at expanding AI capabilities would lift demand for Intel’s traditional server chips, which are typically deployed alongside Nvidia’s market-leading GPUs. However, Intel said demand surged faster than many cloud providers anticipated.

“They were all a little bit caught off guard,” CFO David Zinsner told Reuters, pointing to an erosion in networking performance that forced cloud giants to accelerate upgrades of aging chip infrastructure.

After years of execution missteps that left Intel trailing rivals in AI and strained its finances, CEO Lip Bu Tan has launched a turnaround strategy focused on cost cuts, streamlining management, and resetting the company’s product roadmap. As part of that effort, Intel has delayed major investments in its next-generation 14A manufacturing process until it secures a large external customer.

According to Zinsner, any major manufacturing deal would show up quickly in Intel’s capital spending, which would rise sharply if a big contract is signed.

Investor confidence in Intel’s revival has remained relatively strong, helped by several high-profile investments last year, including $5 billion from Nvidia, $2 billion from SoftBank, and backing from the U.S. government.

“For investors, the key takeaway is that Intel’s turnaround remains supply-constrained rather than demand-constrained,” said Michael Schulman, chief investment officer at Running Point Capital. “That’s frustrating, because it delays financial recovery despite solid products and strong customer interest.”

Tan has also scaled back Intel’s contract manufacturing ambitions championed by former CEO Pat Gelsinger, aiming to strengthen the balance sheet after capital-heavy expansions squeezed margins.

After plunging more than 60% in 2024, Intel’s stock rebounded sharply in 2025, rising 84% and outperforming the broader semiconductor index, which gained 42%. Shares are already up more than 40% so far this month.

On the product front, Intel has begun shipping its new Panther Lake PC chips, the first built using its critical 18A manufacturing process. While analysts expected early production to pressure margins, reports suggest only a small portion of chips produced using 18A initially met quality standards. Intel says yields are improving month by month, though weak yields typically weigh on profitability.

Meanwhile, a global shortage of memory chips has driven up PC prices, hurting demand in one of Intel’s core markets. Zinsner said supply conditions are expected to be tight in the first quarter but should improve in the second.

Intel is also continuing to lose PC market share to rival AMD and to Arm-based designs, underscoring the competitive pressure the company faces as it attempts to execute its turnaround.