Intel shows stabilisation, but AI shift remains unproven

Intel’s fourth-quarter and full-year 2025 results point to a company that has steadied its core operations after several turbulent years, even as its ambition to reposition itself as a competitive force in artificial intelligence and advanced manufacturing remains largely untested. The numbers indicate improving execution and cost discipline, but they stop short of demonstrating a clear and durable return to growth in the markets now driving the global semiconductor cycle.

Revenue for the December quarter was broadly in line with internal expectations, reflecting firmer demand across client computing and a modest recovery in data centre orders after prolonged inventory corrections. Management highlighted sequential improvements in gross margin, supported by manufacturing efficiencies and a lower cost base following workforce reductions and capital expenditure restraint implemented over the past two years. Full-year revenue, however, remained well below levels recorded earlier in the decade, underscoring how far the company still has to climb.

The client computing group, long Intel’s largest revenue engine, showed signs of stabilisation as enterprise customers resumed cautious PC refresh cycles and consumer demand benefited from a slower-than-feared economic backdrop. Average selling prices improved, helped by a richer mix of higher-end processors, although shipment volumes remained constrained by competition and changing usage patterns. The performance suggested that the sharp contraction seen after the pandemic-era boom has eased, but not yet reversed decisively.

In data centres, Intel reported incremental gains as cloud providers and enterprise clients resumed selective spending. The segment continues to face structural pressure from rivals that have moved more aggressively into high-performance and AI-optimised chips. While management pointed to design wins and improving roadmaps, the business has yet to regain the market share lost over several years, and margins remain under strain from pricing pressure and the cost of supporting multiple product lines.

The most closely watched area of the results was Intel’s progress in artificial intelligence, where the company has been working to reposition itself after falling behind peers that dominate training and inference workloads. Revenue from AI-related accelerators and supporting products grew from a low base, reflecting early uptake of newer offerings and increased engagement with system partners. Executives described customer interest as encouraging, but acknowledged that volumes remain modest compared with established market leaders.

Intel’s strategy hinges not only on selling AI chips but also on building an advanced manufacturing platform capable of serving both its own products and external customers. The foundry business, which remains loss-making, showed narrower operating losses as utilisation improved and cost controls took hold. Progress on next-generation process technologies was cited as being broadly on schedule, with early production milestones achieved and additional customer commitments secured. Even so, the scale required to make the foundry unit economically self-sustaining has not yet been reached.

Capital spending was tightly managed through 2025, reflecting a more disciplined approach to investment after years of heavy outlays. Management reiterated its intention to balance long-term manufacturing ambitions with near-term financial resilience, a stance welcomed by investors wary of further strain on cash flows. Net debt levels stabilised over the year, aided by asset sales and government incentives linked to domestic manufacturing expansion, though leverage remains higher than historical norms for the company.