Intel CFO David Zinsner indicates on the company’s fourth-quarter earnings call that server CPU demand over the past two quarters caught the chipmaker off guard, particularly when it comes to the company’s hyperscaler customers.
Intel said Thursday it expects a shortage of its CPUs to peak in the first quarter as the company indicated that the ongoing AI data center boom is creating unexpectedly high demand for its server processors and could potentially hurt PC chip demand.
The comments were made in Intel’s fourth-quarter earnings release, where it reported that revenue declined 4 percent year over year to $13.7 billion. This was roughly the same as the previous quarter and slightly above the average estimate among Wall Street analysts as well as the semiconductor giant’s own forecast.
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The Santa Clara, Calif.-based company reported a non-GAAP earnings per share of 15 cents, up 15 percent year over year and above the average analyst consensus as well as Intel’s own expectations. Gross margin was 37.9 percent on a non-GAAP basis, down 4.2 points but above the chipmaker’s expectations.
Following a statement by Intel CFO David Zinsner that the company’s CPU supply will improve after the first quarter—which concludes in late March—the chipmaker’s CEO, Lip-Bu Tan, noted on its earnings call how the chipmaker managed to exceed its financial expectations despite the ongoing shortage.
“We delivered these results despite supply constraints, which meaningfully limited our ability to capture all of the strengths in our underlying markets. We are working aggressively to address this and better support our customers’ needs,” he said.
Near the end of his prepared remarks, Tan said he is “disappointed that we are not able to fully meet the demand in our markets.” He added: “My team and I are working tirelessly to drive efficiency and more output from our fabs.”
Facing these supply constraints, Intel expects revenue in the first quarter to come in between $11.7 billion and $12.7 billion. At the midpoint, this would represent an 11 percent sequential decline and a 3.9 percent decline from the same period last year.
Intel’s stock price was down more than 12 percent in after-hours trading to $47.60.
AI Demand For Server CPUs Seems To Catch Intel Off Guard
For the fourth quarter, Intel’s Data Center and AI segment saw the most revenue growth, increasing 9 percent year over year to $4.7 billion. Zinsner said this represented the “fastest sequential growth” the company has seen this decade for the segment, noting that “revenue would have been meaningfully higher if we had more supply.”
Tan said data center revenue was driven by “very strong” demand for traditional server CPU products going into AI data centers.
“The continuing proliferation and diversification of AI workloads is placing significant capacity constraints on traditional and new hardware infrastructure, reinforcing the growing and essential role CPUs play in the AI era,” he said.
In light of the ongoing CPU shortage, Tan said the company is “focused on ramping available capacity to support the meaningful uptick we are seeing, including partnering with key customers to support their needs beyond 2026.”
Elaborating on the demand drivers for server CPUs, Zinsner pointed to AI inference workloads, particularly AI agents that operate autonomously.
“The world is shifting from human-prompted requests to persistent and recursive commands driven by computer-to-computer interactions. The CPU central function coordinating this traffic will drive not only traditional server refresh but new demand that grows the installed base,” he said.
The CFO indicated that server CPU demand over the past two quarters caught Intel off guard, particularly when it came to the company’s hyperscaler customers.
“If you go back six months or so ago and looked at what the outlook was, core count was absolutely looking like it would increase, but the units were not expected to increase, and that every hyperscaler customer we talked to was signaling that,” Zinsner said.
“Obviously, it has rapidly increased over the third and fourth [quarters]. And in talking to a few of [the hyperscaler customers] right before this call, [we] got the feeling like it was going to be a story we’d feel for several years,” he added.
While Zinsner said Intel’s advantage as a chip manufacturer is that is can “squeeze out as much supply as possible,” the company wasn’t “managing the supply to an expectation that there would be unit increases that significantly in data center.”
Intel Expects Potential Hit To PC Revenue From AI Boom
Zinsner said the CPU supply squeeze continued to impact the Client Computing Group— which saw revenue decline 7 percent to $8.2 billion—forcing the company to prioritize production of high-end and mid-range processors over low-end models.
“And then to the extent we have excess, we’re pushing all of that into the data center space to meet that customer demand,” he said.
The CFO added that Intel expects to see “share adjustments” based on these decisions, emphasizing that the company is making these moves for its main customers.
“Our primary focus is to our main customers. And obviously we have important customers on the data center side. We have important OEM customers on both data center and client, and that needs to be our priority to get the limited supply we have to those customers,” he said.
Earlier in the call, Zinsner noted how the company is also experiencing the effects of other component shortages, saying that they could limit Intel’s client revenue this year. All of this is happening because of the ongoing AI data center boom, according to the CFO.
“Over the last several months, industry-wide supply for key components like DRAM [memory], NAND [storage] and substrates [have] come under increasing pressure due to intense demand to support the rapid expansion of AI infrastructure,” he said.
