Intel Earnings: Can the "Chip Shortage" Narrative and 18A Progress Sustain the Rally?
Chip giant $Intel(INTC)$
Three Things to Watch
How will management address the recent "Server CPU Shortage" narrative?
The market has begun to focus on the explosion in demand for CPUs driven by the AI inference era, potentially leading to "memory-cycle style" shortages for server CPUs. Last week, this narrative gained significant traction on Wall Street. Major investment bank KeyBanc released a report predicting that server CPU capacity for both $Intel(INTC)$
Last quarter, Intel management stated that despite competitive pressure from AMD's EPYC, Intel server CPUs remain the preferred choice for AI head nodes, and demand for Granite Rapids (built on Intel 3 + Intel 7 process) remains robust. The primary bottleneck is capacity. Last year, strong demand for N-1/N-2 generation PC products meant that "legacy" capacity on Intel 10 and Intel 7 nodes limited the company's ability to fully meet data center demand in Q3 2025. However, management has no plans to expand this "legacy" capacity, and substrate shortages are being managed primarily through inventory. The peak of this capacity shortage is expected to hit in Q1 2026. It will be crucial to see how management responds to the market's anticipation of this looming "supply crunch."
What is the progress on Intel 18A/18AP mass production? Will there be new customers for 14A?
Since Intel officially launched its Panther Lake laptop CPUs (utilizing the proprietary 18A process) at CES earlier this year, the stock has continued to climb, with cumulative gains far outperforming other semiconductor peers. To a certain extent, this reflects market optimism regarding the 18A process.
Why is the 18A process so critical? Intel's Foundry business has accumulated operating losses exceeding $10 billion over the past four quarters. If 18A can successfully ramp up volume, it could drive a significant reduction in Foundry losses. While this financial impact won't be immediately visible this quarter—and Intel has noted that the 18A node won't reach full capacity until 2030—the improvement in the trend is what matters.
Furthermore, the 18A process currently lacks external clients. If Intel's own 18A products can prove the foundry's technical competence, it could attract more external customers (such as the rumored Apple interest) to future nodes like 14A. Last quarter, management indicated they are actively engaging with potential external clients for 14A and are encouraged by early feedback, noting that 14A is showing better performance and yield characteristics than previous nodes at the same stage. If management announces a new 14A client this quarter, it would significantly boost market confidence in the Foundry business.
However, Intel remains cautious about long-term capacity expansion. Management previously stated they would only increase capacity upon securing committed demand from external customers. Gross CapEx for 2026 is expected to remain flat year-over-year at $18 billion—a figure that pales in comparison to $Taiwan Semiconductor Manufacturing(TSM)$
What is the demand outlook for Panther Lake, and how will rising memory prices impact PC shipments?
Laptops equipped with Panther Lake CPUs are expected to go on sale in late January, followed by the rollout of over 200 OEM models (compared to roughly 120+ OEM models for the competing AMD Ryzen AI 400 series).
Intel's PC business operating margin improved to 32% in Q3 2025 and is expected to rise further to 34% this quarter (significantly higher than AMD's Client/Gaming margins). Management has stated that Intel’s position in both consumer and enterprise laptop segments remains formidable. For Intel, the PC business remains the absolute pillar, contributing 63% of revenue and 394% of the company's operating profit in Q3 2025.
However, the market remains concerned about the shock to PC demand caused by skyrocketing storage and memory prices. Reports suggest that some mobile and PC manufacturers have begun slashing shipment forecasts for 2026. All eyes will be on how management addresses the impact of these rising component costs on PC demand in this earnings report.
Q4 Core Financial Indicators
– Revenue: Market consensus expects revenue of $13.4 billion, down 6% YoY and down 2% QoQ, compared to the company's guidance range of $12.8-13.8 billion.
– Gross Margin: Market consensus expects GAAP gross margin of 35.6%, down 3.6 percentage points YoY and down 2.6 percentage points QoQ, versus the company's guidance of 34.5%; Non-GAAP gross margin consensus is 36.5%, down 5.6 percentage points YoY and down 3.5 percentage points QoQ, in line with the company's guidance of 36.5%.
– Net Income/Loss: Market consensus expects a GAAP net loss of $660 million, returning to loss territory; Non-GAAP net income consensus is $439 million, down 23% YoY and down 57% QoQ, compared to the company's guidance of $360 million.
Option Market Signals
Heading into the earnings print, Intel displays a constructive yet volatile options profile defined by a 0.76 Put/Call ratio that suggests traders are maintaining a bullish directional bias despite the looming event risk.
The derivatives market is actively pricing in a substantial stock reaction as Implied Volatility has surged to 66.98% to significantly eclipse the 58.29% Historical Volatility, resulting in an elevated IV Percentile of 79% that confirms market makers are demanding rich premiums to underwrite the expected fluctuation.
Summary
Overall, market expectations for Intel's actual financial results are modest; investors are primarily listening for a tone of improvement and confirmation that a recovery trend is established. As for the short-term narratives regarding server CPU shortages and bets on 18A revitalizing the Foundry business, these act more as fuel for market sentiment rather than immediate financial drivers.
A review of history suggests caution: Intel's stock has closed higher on earnings day in only three of the last nine quarters.
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