Why Intel's (INTC) Recent Earnings Miss and Restructuring Signal a Strategic Avoidance for Long-Term Investors

In the second quarter of 2025, Intel Corporation (INTC) delivered a financial performance that sent shockwaves through the semiconductor industry. The company reported a GAAP net loss of $2.9 billion, or $(0.67) per share, and a non-GAAP net loss of $400 million, or $(0.10) per share. These results, far worse than even the most bearish expectations, were driven by $1.9 billion in restructuring charges, $800 million in impairment costs, and $200 million in one-time expenses. Yet, for long-term investors, this earnings miss is not a red flag—it is a calculated, strategic recalibration in a cyclical industry where survival often requires short-term pain for long-term gain.

The Earnings Miss: A Product of Strategic Overhaul

Intel's Q2 revenue of $12.9 billion was flat year-over-year, a reflection of the broader semiconductor industry's struggle with macroeconomic headwinds and inventory overhangs. However, the company's margins collapsed. GAAP gross margin fell to 27.5% from 35.4% in Q2 2024, while non-GAAP gross margin dropped to 29.7% from 38.7%. The culprit? Restructuring and impairment charges that eroded 800 basis points of gross margin.

Critically, these charges were not part of Intel's guidance, underscoring the magnitude of its restructuring. The $1.9 billion in restructuring costs—primarily from a 15% workforce reduction—signals a deliberate pivot to streamline operations. By cutting 21,400 employees, Intel is transforming from a bloated, slow-moving entity into a leaner, more agile competitor. The company also paused projects in Germany and Poland, consolidated assembly operations in Costa Rica into Vietnam and Malaysia, and slowed construction in Ohio. These moves align with a broader “Smart Capital” strategy to prioritize capital efficiency over blind expansion.

Historical data reveals a pattern: when Intel misses earnings expectations, the stock often experiences short-term volatility. From 2022 to the present, INTC has missed earnings four times, with a 3-day win rate of 75% and a 10-day win rate of 75%, but a declining 30-day win rate of 50%. The 30-day average return after an earnings miss has been -5.11%, while the 3-day return has averaged +1.52%. This suggests that while the market may react positively in the immediate aftermath of a miss (likely due to short-term liquidity or sentiment shifts), the longer-term outlook tends to normalize downward unless fundamentals improve. For Intel, the key lies in whether these restructuring charges—while painful—are one-time adjustments or signals of deeper operational struggles.

Valuation Realism in a Cyclical Industry

The semiconductor sector is inherently cyclical, with demand for chips swinging wildly between shortages and gluts. Intel's Q2 results must be evaluated through this lens. While its non-GAAP operating expenses of $4.3 billion (down 13% YoY) and $18 billion in 2025 capex reflect cost discipline, the company's valuation remains unattractive to many investors. As of August 2025, Intel trades at a price-to-earnings (P/E) ratio of 12x, below the industry average of 16x, but its forward P/E is negative due to ongoing losses.

However, valuation realism requires separating accounting noise from operational substance. Intel's $1.9 billion in restructuring charges are non-recurring, and its 2026 operating expense target of $16 billion (a $1 billion reduction from 2025) suggests improving cost structure. Meanwhile, its foundry business, which generated $4.4 billion in Q2 revenue (up 3% YoY), is a strategic asset in an industry increasingly reliant on third-party manufacturing. The data here is clear: Intel is not burning cash for growth—it is repositioning for it.

Strategic Avoidance: Why Long-Term Investors Should Pay Attention

Intel's restructuring is a textbook example of strategic avoidance—avoiding the pitfalls of overleveraging during a downturn and avoiding the risk of being outpaced by more agile rivals. By halting projects in Germany and Poland, the company is avoiding capital overcommitment in markets where demand is uncertain. Similarly, its shift to Vietnam and Malaysia leverages lower labor costs and political stability, a move that could pay dividends in the next upcycle.

For investors, the key question is whether Intel's cost-cutting will outpace its peers in generating sustainable free cash flow. The company's Q2 cash from operations of $2.1 billion is a positive sign, but it must sustain this momentum. A critical benchmark will be 2026, when Intel's non-GAAP operating expenses are expected to drop to $16 billion. If the company can achieve this while maintaining or growing foundry revenue, its valuation could become compelling.

Investment Thesis: A High-Conviction Bet on Execution

The semiconductor industry is at a crossroads. While Intel's Q2 results are painful, its restructuring is a necessary step to align with industry realities. For long-term investors, the risks are clear: execution missteps, delayed AI adoption, or supply chain disruptions could derail recovery. However, the rewards are equally significant. A leaner Intel with a disciplined cost structure and a strong foundry business could reestablish itself as a leader in AI and high-performance computing.

Investment advice: Investors with a 5+ year horizon should consider a cautious, dollar-cost-averaged entry into Intel. The stock is likely to remain volatile in the near term, but its strategic moves position it to outperform in the next upcycle. Monitor two metrics closely: 1) the pace of operating expense reductions in 2026 and 2) foundry revenue growth. If both show progress, the valuation discount may narrow significantly.

In conclusion, Intel's earnings miss is not a reason to flee—it is a signal that the company is taking the hard steps to survive and thrive in a cyclical industry. For long-term investors, the question is not whether Intel will rebound, but whether it will do so faster than its rivals. The answer may well define the next decade of semiconductor innovation.