Intel’s AI Surge and Strategic Reset

Ray Marce

Welcome back to Market & Earnings Digest. It's Ray here, joined as always by Mark Dalli. Today, we're breaking down Intel's Q4 2025 results—there's plenty to chew over, especially with AI demand and a bit of a strategic reset at play. Mark, where do you want to kick this off?

Mark Dalli

Cheers Ray, good to be here. Let's get right to it—Intel reported Q4 revenue of $13.7 billion, that’s actually down about 4% year over year, but crucially, it came in roughly $400 million over what they’d guided for back in October. Now, on a non-GAAP basis, their EPS was $0.15, up $0.02 year on year and $0.07 above what they’d forecast. If you’re looking at the GAAP numbers, EPS was negative 12 cents, so a loss technically, but this is one of those cases where the non-GAAP numbers tell a much more optimistic story.

Ray Marce

Yeah, and—look, I’ll hedge this a bit—but gross margin held up better than expected as well: non-GAAP was 37.9%, which is still down from last year by a bit over four percentage points, but it beat their own guidance by a fair margin. All that, even while they kept running into supply constraints trying to meet demand, especially for AI and server chips. They're saying demand actually outpaced what they could ship both for server and client, which is a bit of a twist compared to the usual inventory overhang woes we hear in semis.

Mark Dalli

Right, and what stood out to me was the commentary from Lip-Bu Tan, the CEO—he really hammered home Intel's conviction in CPUs being essential for the AI era, and he called out the milestone of launching products on their new 18A process node. And they’re scaling up manufacturing for that in Arizona and Oregon, so fully US-based leading-edge node, which—given what’s happening geopolitically and with supply chains—is a point of differentiation right now.

Ray Marce

Absolutely, and their CFO, David Zinsner, highlighted how Q4 actually exceeded expectations across revenue, margin, and EPS, despite those ongoing industry-wide supply shortages. They're also looking for supply to be at its tightest in Q1 before improving further into the year, which should help with mix and margins if demand holds up.

Mark Dalli

Yeah, and on the full-year front, revenue was essentially flat at $52.9 billion, but if you strip out the noise from things like the Altera deconsolidation—they sold 51% of Altera in September, so that's now gone from their consolidated numbers—you can see the core business stabilizing.

Ray Marce

Let’s dig into segments for a second. Data Center and AI—the DCAI bit—was a real bright spot: up 9% year over year to $4.7 billion in Q4. Not bad amid all this talk of bottlenecks, right?

Mark Dalli

Exactly. That’s clear evidence of just how much AI demand is propping up the data center world. And they're not just shipping CPUs; they've got focused ambitions on GPUs and ASICs as well, but, you know, CPUs are still front and center. By comparison, the Client Computing Group—that’s the PC segment—was down 7% to $8.2 billion, softer but honestly not as bad as it could’ve been in a cyclical PC market.

Ray Marce

Yeah, and with those client numbers, they’ve started to ramp their Core Ultra Series 3—the new AI PC platform built on the 18A node you mentioned—which is shaping up to be their broadest AI PC launch ever. They reckon they’ll be in over 200 designs, touching everything from premium laptops to robotics. It's the first time in a while I’ve heard that many OEMs lining up for an Intel platform, to be honest.

Mark Dalli

And let’s not forget about Foundry, Ray. The foundry business saw revenue up 4% to $4.5 billion in the quarter. Now, obviously, operating losses are still hefty here—over $2.5 billion operating loss this quarter—but Intel’s clearly investing for the long-term play, positioning themselves as a US-based alternative especially as policymakers push for domestic chipmaking. They're also making progress with high numerical aperture EUV lithography, the sort of stuff ASML’s been touting for future proofing fabs.

Ray Marce

Mobileye—Intel’s autonomous driving unit—remains in the “All Other” category. It delivered 15% revenue growth and 45% operating income growth. Strong numbers there, though with Altera now deconsolidated, that segment's shrunk in overall impact.

Mark Dalli

A quick point on cost controls as well: R&D and MG&A were down 14% quarter on quarter, and for the full year, operating expenses came down a chunky 17% on a GAAP basis. That discipline is going to be key as they chase margin recovery.

Ray Marce

Intel made a big noise this quarter about hitting several milestones. We already mentioned the Core Ultra Series 3 launch, but they also partnered with Cisco on an integrated platform for distributed AI workloads—those edge platforms, right? It's more than just a press release: real-time inferencing at the edge is quickly becoming a must-have, especially with data traffic blowing up these days.

Mark Dalli

Yeah, and the organizational changes are worth noting too. They’ve centralized the data center and AI businesses under one leader, Kevork Kechichian, which should help with execution and accountability, at least in theory. Oh, and let’s not gloss over the sale of $5 billion in stock to NVIDIA. That’s more than just a capital raise—it's also about strategic flexibility, and, dare I say, credibility in those cross-industry relationships. If NVIDIA's buying, the rest of us ought to pay attention.

Ray Marce

And the leadership shake-up—three new senior VPs and a new board member. That's some fresh blood, which may help as they try to reinvigorate that engineering culture Lip-Bu Tan keeps mentioning. There's a real push to rebuild the Intel of old, if you listen between the lines.

Mark Dalli

Yeah, it's classic "back to basics" meets "future bet," right? Also, with foundry and the 18A node, their claim is they're now the only company doing research, design, and high-volume manufacturing all in the US. That's a strategic message with the CHIPS Act and US industrial policy as the backdrop. We’ve talked about policy tailwinds in previous episodes—like we said for First Solar or Tesla—the national policy piece can really move the dial for certain companies right now.

Ray Marce

Alright, so what’s the setup for Q1 and the year ahead? Intel's guiding for $11.7 to $12.7 billion in revenue next quarter. That's a $500 million dip year-on-year at the midpoint. Non-GAAP gross margin guide is 34.5%, and non-GAAP EPS expected to be exactly zero. Not negative, not positive—zero.

Mark Dalli

That's, uh, not a thrilling forecast, is it? But with supply at its tightest and improvement expected into Q2 and beyond, they're kind of setting up for a subdued first quarter with hopes for a rebound as the year progresses. It’s a cautious playbook, not an “everything is rosy” guide.

Ray Marce

Yeah, and look, there are risks here: macroeconomic uncertainty hasn’t gone away, and those supply chains are still susceptible to shocks. The commentary emphasized ongoing risks around geopolitical tensions, changes in demand, competitive pressure, you name it. And with all the AI excitement, you do get the feeling that Intel’s got to execute everything near perfectly to turn this demand into sustainable, profitable growth.

Mark Dalli

Completely agree. The move to centralize operations, tighten expenses, launch new nodes quickly—it’s all needed, but it’s also a lot at once. Execution risk is high, particularly competing with foundry heavyweights and managing the transition out of legacy businesses like Altera. It's ambitious, but ambition is what drove some of the turnaround stories we've discussed before. We’ll see—if Intel pulls it off, there’s big upside; if not, they’re exposed.

Ray Marce

Alright, that wraps our deep dive into Intel’s Q4 2025 and what looks like a pivotal moment for the company. As always, thanks for listening to Market & Earnings Digest. We’ll track how these AI and foundry ambitions play out over the next few quarters. Mark, always a pleasure.

Mark Dalli

Pleasure’s mine, Ray. And for everyone tuning in, we’ll be back soon with more earnings reactions and market color—take care, stay informed, and goodbye for now.

Ray Marce

Cheers, everyone. See you next time.