By Arsheeya Bajwa
Jan 22 (Reuters) - Intel forecast first-quarter revenue and profit below market estimates on Thursday, as it struggles to match supply to booming demand for traditional server chips used
in artificial intelligence data centers.
Intel shares slumped roughly 5% in the extended session.
Intel forecast current-quarter revenue at between $11.7 billion and $12.7 billion, compared with analysts' average estimate of $12.51 billion, according to data compiled by LSEG.
It expects adjusted earnings per share to break even in the first quarter, compared with expectations of adjusted earnings of 5 cents per share.
Investors and analysts have hoped that rapid data center buildouts commissioned by large tech companies to advance their AI businesses will drive sales for Intel's traditional server chips that are used alongside Nvidia's market-leading graphics processing units (GPU).
After years of missteps left Intel struggling in the fast-growing AI chip market and drained its finances, Tan has engineered a turnaround strategy centered on cutting costs and eliminating management layers, while championing a fresh product road map.
With a slew of high-profile investments in Intel last year - a $5 billion investment from Nvidia, $2 billion from SoftBank and a U.S. government stake in the company - investors' confidence in the company's revival has been high.
Tan has also significantly pared back contract manufacturing ambitions promoted by his predecessor, Pat Gelsinger, in an effort to shore up Intel's balance sheet after capital-intensive expansions pummeled margins.
After a more than 60% drop in its share price in 2024, Intel's stock gained 84% in 2025, far outperforming the benchmark semiconductor index's 42% rise. Its shares are up more than 40% so far this month.
The company has started shipping its new "Panther Lake" PC chips - the first product made using Intel's make-or-break 18A manufacturing technology, and analysts expected the production ramp-up to hurt margins.
Reuters has reported that only a small percentage of the chips printed via 18A have been good enough to make available to customers. Intel has said its yields, or the number of good chips per silicon wafer, are improving monthly. Weak yields also routinely pressure margins.
A global shortage of memory chips has boosted memory chip prices and made personal computers- a key market for Intel - more expensive.
"We navigated industry-wide supply shortages,” said David Zinsner, Intel's chief financial officer. “We expect our available supply to be at its lowest level in Q1 before improving in Q2 and beyond."
Intel has also been consistently losing share in the PC market to rival AMD and chip blueprint designer Arm Holdings.
(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco; Additional reporting by Stephen Nellis in San Francisco; Editing by Sayantani Ghosh and Matthew Lewis)
