Some of the children least likely to get breakfast at home are missing out on free cereals at school because their parents "can't be bothered" to take them in early.
Instead, it is working parents who are making the most of the Assembly government initiative, and using it as cheap childcare.
The first review of the pilot free breakfast initiative shows it has had a major impact on working parents. But the authors recommend more should be done to encourage needy children to take up their entitlement.
Providing breakfast for every primary pupil was a key manifesto pledge by First Minister Rhodri Morgan in the run-up to the 2003 Assembly elections.
An initial pound;1.5 million funded pilots in 2004-5 in schools in "Communities First" areas - the poorest in Wales, with high levels of unemployment and disadvantage.
The Assembly government plans to roll out the project to all primary pupils in the state sector by January 2007, and has set aside pound;13.5m up to 2008.
The pilot schools offer breakfasts of sugar-free cereal, toast, fruit and yogurt. Researchers from Cardiff university looked at 37 pilot primaries in nine local education authorities between September and December 2004.
While feedback was positive, with schools reporting improvements in punctuality, pupil performance and health, it was felt some target children were not being reached. The view was that working parents saw the service as an "inexpensive form of childcare".
One school said: "There are children who can't come because their parents won't bring them."
Another said: "It was the intention to target those we know don't have breakfast. But if parents can't be bothered to make breakfast. they can't be bothered to bring them to school early."
Fourteen of the schools said they had a mix of socio-economic groups, but two said most of their take-up was from working parents who were more "motivated". Take-up ranged from 8 to 80 per cent of all pupils.
Funding and resources were also big issues, with one head reporting five hours' lost administration time per week running the scheme.
And there were complaints that 25p per pupil was not enough to provide the healthiest breakfast possible. One local authority member suggested offering free lunches to every pupil instead.
The report, discussed this week by the Assembly's education committee, also recommends an in-depth review of the implications for school staff. Jeff Cuthbert, Labour Assembly member for Caerphilly, said the scheme had many positive benefits, but was worried that some needy children are missing out "because their parents are not getting them to school on time".
Education and lifelong learning minister Jane Davidson said: "This was intended to be a breakfast, not a childcare, scheme. Some schools say pupils who need breakfasts are getting them."
Geraint Davies, secretary of the NASUWT, said: "This is a damning report and a crossroads for the breakfast scheme. The money should be used for other areas of education."