Intel Posts First Profit in Two Years, But Chip Shortages Persist into 2026
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Intel is prioritizing AI server chips amid ongoing supply constraints, a strategy revealed during its Q3 2025 earnings call. The company reported its first profit in nearly two years, but cautioned that chip shortages are expected to peak in the first quarter of 2026.
AI Demand Drives Strategy Shift
Despite the positive earnings report, Intel faces a critical challenge: insufficient chip supply. Leaders indicated a deliberate shift in focus, prioritizing the production of AI server chips over some consumer processors to address current market demands. “We expect CCG [Intel’s consumer chips] to be down modestly and DCAI [Intel’s server chips] to be up strongly as we prioritize capacity for server shipments over entry level client parts,” a company spokesperson stated.
This strategic realignment reflects the surging demand for artificial intelligence infrastructure. Intel announced plans to release new AI GPUs annually, mirroring the cadence adopted by competitors Nvidia and AMD. The implications for Intel’s gaming GPU development remain unclear.
Panther Lake Launch Delayed, Lunar Lake to Fill the Gap
All eyes are on Intel’s Panther Lake processor and its advanced 18A process, seen as crucial for regaining dominance in the consumer PC chip market. However, the company confirmed a phased rollout, launching only one configuration this year with additional models arriving in 2026.
A senior official hinted that Panther Lake will be a “pretty expensive” product initially, necessitating a continued reliance on the existing Lunar Lake chips, “in at least the first half of the year.” This suggests a tiered approach, with Lunar Lake serving as a more accessible option while Panther Lake targets high-end consumers.
18A Process Yields Remain a Concern
While Intel has consistently refuted claims of poor yields with its 18A process, the company acknowledged to investors that current production levels are not yet optimal. Yields are currently “adequate to address the supply but not where we need them to be to drive the appropriate level of margins,” according to a company release. This suggests that achieving “acceptable level of yields” may not occur until 2026 or even 2027.
To navigate these constraints, Intel will be “working closely with customers to maximize our available output, including adjusting pricing and mix, to shift demand towards products where we have supply and they have demand.” This indicates potential price adjustments and a push towards Lunar Lake as a more readily available alternative.
Capacity Expansion Tied to Firm Orders
Intel’s CEO reiterated the company’s cautious approach to capacity expansion, stating that further investment requires “committed external demand.” The CFO added that investments in capacity next year won’t “significantly change expectations” in the short term.
Despite these challenges, Intel remains optimistic about the long-term viability of its 18A process, asserting it will power “at least the next three generations of client and server products.” The company has abandoned plans for a return to the traditional “tick-tock” development cycle, where chip shrinking and architectural updates alternated each generation.
Intel 14A Receives a Reprieve
In a surprising turn, Intel announced that its Intel 14A node, previously considered at risk of cancellation, has been revitalized thanks to renewed customer interest. A senior official stated the company is “delighted and more confident” in 14A, with early performance and yields exceeding those of the 18A process at a comparable stage.
