In its Q3 2025 earnings report released on October 24, 2025, Intel Corporation revealed a paradoxical situation: robust demand for its central processing units (CPUs) is outstripping supply, leading to shortages that could persist into 2026. Despite ongoing challenges in its foundry business and competitive pressures, the chip giant posted a return to year-over-year revenue growth, signaling a potential turnaround amid the AI boom. However, executives warned that capacity constraints on older manufacturing nodes are hampering the company’s ability to meet surging needs from data centers and consumer markets.
Intel, headquartered in Santa Clara, California, has been navigating a tumultuous period. Once the undisputed leader in semiconductor manufacturing, the company has faced setbacks including manufacturing delays, leadership changes, and intense rivalry from TSMC and AMD.
Under new CEO Lip-Bu Tan, appointed in early 2025, Intel is refocusing on its foundry ambitions while addressing immediate supply issues. The Q3 results highlight progress but underscore persistent hurdles in scaling production to match AI-driven demand.
Financially, Intel reported $13.7 billion in revenue, a 3% increase year-over-year and 6% quarter-over-quarter, beating Wall Street expectations. This marked the first YoY growth since Q4 2023. Net income swung to a positive $4.1 billion from a $16.6 billion loss in Q3 2024, bolstered by one-time gains including $5 billion from Nvidia, $2 billion from SoftBank, $5.7 billion in U.S. government funding, and proceeds from selling its Altera unit and part of its Mobileye stake. Operating profit stood at about $1 billion after adjusting for these items. Gross margin improved to 38.2%, while operating expenses dropped to $4.4 billion, reflecting cost-cutting measures.
Segment performance varied. The Client Computing Group (CCG), which includes PC chips, led the charge with $8.5 billion in revenue, up 5% YoY and 7.6% QoQ, driven by lower inventory reserves at PC makers and strong demand for CPUs. In contrast, the Data Center and AI segment dipped 1% YoY to $4.1 billion, though executives noted accelerating demand for Xeon processors. Intel Foundry, a key pillar of Tan’s strategy, reported a 2% YoY decline and a $2.3 billion operating loss, as it awaits major external customers.
The supply shortages stem primarily from tight capacity on Intel’s older nodes, Intel 10 and Intel 7, which power products like 13th and 14th Generation Core (Raptor Lake) desktop CPUs and 4th/5th Generation Xeon Scalable processors. CFO David Zinsner explained, “The shortage is pretty much across our business. I would say we are definitely tight on Intel 7 and 10.” Demand is surging due to AI compute needs in data centers and enterprise migrations from Windows 10 to Windows 11, which often require hardware upgrades. Zinsner noted the Windows refresh has been “more significant than expected,” boosting orders for older Raptor Lake chips despite past voltage issues that Intel has mitigated.
Compounding the problem are external factors, such as shortages in wafer substrates essential for chip packaging, exacerbated by industry-wide AI demand. Intel is not expanding capacity on these legacy nodes, instead relying on existing inventory, which is projected to deplete by Q1 2026. Shortages could extend through Q2 and potentially Q3, with peak constraints in early 2026.
To manage the crunch, Intel is prioritizing higher-margin data center CPUs, like the Xeon 6 “Granite Rapids,” over consumer products. This shift aims to maximize revenue, as server chips sell for thousands of dollars compared to $500-$600 for high-end desktop processors. For consumer chips, the company has implemented a 10% price increase on Raptor Lake-S SKUs, raising standard models from $150-$160 to $170-$180, citing tight inventories and elevated production costs. Intel is also “demand shaping” by encouraging customers to switch to available products and focusing on high-end SKUs to optimize output.
Looking ahead, Intel is betting on its advanced nodes to alleviate pressures. The Intel 18A process, set to rival TSMC’s tech, is on track with the first PC chip, Panther Lake, launching by year-end 2025, followed by more in H1 2026. Desktop Nova Lake, also on 18A, targets 2026 with architectural upgrades for gaming. CEO Tan emphasized disciplined foundry investments, tying expansions to committed demand, and projected 2025 capex at $18 billion, up from $17 billion in 2024.
The implications are multifaceted. For consumers, higher prices and potential delays could dampen PC upgrades, especially in gaming. Enterprises may face bottlenecks in data center expansions, though Intel’s prioritization could stabilize server supply. Analysts view the demand strength positively, with shares rising nearly 2% post-earnings, but caution that foundry losses and competition remain risks. In the broader AI landscape, Intel’s shortages highlight the industry’s capacity strains, potentially benefiting rivals like AMD.
As Tan stated, Intel Foundry holds “long-term potential,” but resolving supply issues will be crucial. With AI adoption accelerating, Intel’s ability to ramp production on new nodes could determine its resurgence—or further challenges—in a market projected to demand trillions in compute infrastructure.
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