Intel Earnings Preview: Can CEO Lip-Bu Tan Jumpstart a Turnaround or Will Q2 Results Disappoint Again?

Intel Corporation (NASDAQ: INTC) is set to report Q2 FY25 earnings after the close today, with investors watching closely for signs of progress—or continued struggle—in the company’s ongoing turnaround under new CEO Lip-Bu Tan. Since assuming the helm in March, Tan has begun a deep restructuring focused on engineering rigor, cost discipline, and AI execution. But for now, the business continues to lose share in key markets such as CPUs and servers, and its foundry ambitions remain far from break-even. Despite some management reshuffling and operational tightening, Intel’s share price action reflects uncertainty. The stock has attempted to hold its $20 base but is under pressure ahead of the report, with the $23 level seen as a potential breakout zone should results surprise positively.

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Wall Street is expecting a muted quarter. The consensus forecast for Q2 calls for revenue of $11.88 billion, down 7.4% year-over-year, and EPS of just $0.01, a 53.4% plunge from a year ago. That would mark Intel’s fifth straight revenue decline and sixth consecutive quarterly net loss. Intel guided Q2 revenue in the $11.2–$12.4 billion range last quarter, so even a result at the high end would reflect persistent macro and competitive headwinds. Gross margin is expected to be around 36.5%, compared to 39.2% in Q1 and still well below historical norms.

Key metrics to watch will include revenue trends in Intel’s Product segment (especially Client Computing Group and Data Center & AI), gross margin performance, foundry unit revenue, and cash flow. Last quarter, revenue was $12.7 billion, driven by Xeon and Raptor Lake demand. But sequentially, Intel Products fell 10%, CCG declined 13%, and DCAI fell 5%, with only Foundry posting growth (+8%). Adjusted free cash flow came in at -$3.7 billion, driven by $6.2 billion in CapEx. The foundry unit remains a significant drag, requiring billions in external customer revenue to break even—an inflection point not expected until 2027.

Management’s Q1 commentary laid out a playbook of cost cuts and structural streamlining. The company is targeting OpEx of $17 billion in 2025 and trimming CapEx by $2 billion to $18 billion. While CFO David Zinsner remains cautious about the outlook, CEO Tan emphasized AI and edge computing as future growth vectors. Yet execution remains a major question. Foundry output is delayed, and Tan is now shifting focus from the hyped Intel 18A node to 14A, raising concerns of a writedown and further timeline risk. Loop Capital recently initiated coverage with a Hold and a $25 target, noting the tension between Intel’s reliance on internal volume to prop up foundry economics and its inability to match TSMC’s capabilities.

Analyst sentiment heading into the print is mixed, with skepticism outweighing optimism. Over the past three months, both EPS and revenue estimates have seen 29 downward revisions. Northland remains hopeful that Intel’s advanced packaging and System-in-Package (SiP) capability could eventually close the gap with TSMC. But others, like Loop, argue that unless Foundry 2.0 is spun out or structurally altered, it will remain a costly anchor. Meanwhile, Intel’s leadership admits it’s not competitive in AI training chips—CEO Tan recently told employees the company is “not in the top 10 semiconductor companies.”

Still, there are pockets of optimism. Demand for AI PCs and Windows 11 refreshes is expected to benefit Intel’s client segment. Lunar Lake chips, designed for thin-and-light laptops, could help the company capture some of this demand. Chief Product Officer Michelle Holthaus noted growing customer excitement around local AI use cases, while also revealing the CEO’s insistence that all future products meet a 50% gross margin threshold—an attempt to instill long-absent financial discipline. But even here, execution risk looms. AMD is also well-positioned to benefit from this refresh cycle and has already overtaken Intel in desktop CPUs.

Another critical issue for investors is internal friction around incentives and strategic alignment. Holthaus hinted at diverging views within senior leadership on pricing tactics and customer incentives, raising questions about cohesion as Tan reshapes the org chart. Intel recently laid off over 500 workers in Oregon and plans broader cuts, aiming to reduce its workforce by up to 20%. Yet, revenue per employee remains low, and cost-cutting alone won’t restore competitiveness without a top-line rebound.

Looking back, Q1 set a low bar. Revenue was down from $14.3 billion in Q4 2024, and while gross margin improved, free cash flow was deeply negative, and the balance sheet deteriorated. Intel now has $21 billion in cash against $50.1 billion in debt. The company raised $0.8 billion by selling a Mobileye stake but remains heavily leveraged compared to TSMC, which is plowing $40 billion annually into CapEx, bolstered by Taiwan’s national $510 billion AI investment plan.

Looking ahead, guidance for Q3 will be crucial. The Street expects revenue of $12.6 billion, down 5% year-over-year. Without a clearer AI strategy or execution proof points, that bar may still prove high. CEO Tan is trying to rebuild from the ground up—restructuring operations, refreshing leadership, and aligning product design with profitability. But as he told staff, the industry has moved on. Intel is no longer a top-tier player, and the turnaround may take years to materialize.

Bottom line: The Q2 print will offer a first look at whether Tan’s early changes are beginning to stabilize the ship—or if Intel remains adrift. Investors appear skeptical, as selling pressure intensifies near $23. But if Intel delivers even modest upside and outlines a clearer AI roadmap, a breakout from its base could follow. For now, though, caution prevails.