Intel Q1 Earnings Review: A Cautious Beat Amid Strategic Overhaul Under New CEO Lip-Bu Tan
3min read Intel’s first earnings report under new CEO Lip-Bu Tan was a mixed bag: headline results beat expectations, but forward guidance fell short, and the company confirmed plans for organizational streamlining and cost cuts, while sidestepping rumors of mass layoffs. Investors responded coolly, sending shares down more than 6% in after-hours trading to test the $20 level—long viewed as a key support zone.
Headline Performance: Beats Expectations, But With Caveats
For the first quarter of 2025, Intel reported adjusted EPS of $0.13, ahead of the $0.01 consensus but down from $0.18 a year ago. Revenue was essentially flat year-over-year at $12.67 billion, beating the $12.3 billion consensus. Adjusted gross margin was 39.2%, comfortably above the 36.1% estimate, though still sharply lower than last year’s 45.1%.
The company posted adjusted operating income of $690 million, translating into an operating margin of just 5.4%, versus 5.7% in Q1 2024. Intel’s net loss on a GAAP basis was $800 million, or $0.19 per share, primarily due to cost of goods sold and restructuring-related writedowns.
Outlook: A Weak Q2 Guides the Tone
Despite a solid Q1 beat, the company issued disappointing guidance for Q2. Intel expects revenue between $11.2 billion and $12.4 billion, below the $12.8 billion analyst forecast. Adjusted EPS is expected to be breakeven—versus a $0.06 consensus—while gross margin guidance of 36.5% narrowly trails Street estimates.
CFO David Zinsner cited "elevated uncertainty" related to macroeconomic conditions and tariff policy. He noted that Q1 likely saw some demand pulled forward from Q2 due to trade-related concerns, softening the company's sequential growth outlook. U.S. tariffs on semiconductors remain in flux, and ongoing friction with China further complicates visibility.
Client Computing and Data Center: Diverging Fortunes
The Client Computing Group (PC chips) saw revenue decline 7.8% year-over-year to $7.63 billion. While that beat estimates of $6.93 billion, the ongoing weakness in consumer PCs and muted enterprise demand remain headwinds.
On the other hand, Datacenter and AI revenue rose 7.8% to $4.13 billion, easily topping the $2.96 billion estimate. That segment now includes networking and edge computing, a change implemented by Tan to streamline the product lineup and better align around AI infrastructure.
Tan also appointed networking chief Sachin Katti as Chief Technology Officer and head of AI, underscoring Intel’s intent to regain ground lost to Nvidia and AMD in the data center and AI acceleration markets.
Foundry Momentum and Other Segments
Intel Foundry revenue rose 7.1% year-over-year to $4.67 billion, mostly through internal production for other business units, but the growth signals early traction in Intel's bid to become a competitive third-party chipmaker.
The “All Other” category, which includes stakes in Mobileye and Altera, posted revenue of $943 million—up 47% from a year ago. That handily beat estimates, though these contributions remain modest relative to the company’s core businesses.
Cost Cuts and Organizational Streamlining
Tan’s leadership marks a shift in tone and strategy. Rather than the widely rumored 20,000-job layoff, Intel announced a broad efficiency push: flattening management layers, reducing OpEx, and cutting capex targets.
Operating expenses are now expected to be $17 billion in 2025 (down from $17.5B) and $16 billion in 2026. Capital expenditures were trimmed to $18 billion in 2025 (from $20B), though net capex remains forecast between $8 billion and $11 billion.
In a memo to employees, Tan acknowledged that workforce reductions are inevitable: “There is no way around the fact that these critical changes will reduce the size of our workforce.” Job cuts, while not yet finalized, will begin this quarter and focus on management ranks rather than sweeping headcount reductions.
CEO Commentary: “No Quick Fixes”
Lip-Bu Tan, who took the reins in March, has inherited a company still struggling to regain competitiveness. His Q1 message was sober: “There are no quick fixes. But this quarter was a step in the right direction.”
Tan emphasized a back-to-basics approach—empowering engineers, refocusing on execution, and tightening operations. He also ruled out near-term M&A, citing the need to first stabilize Intel’s balance sheet.
Conclusion: Incremental Progress, But Long Road Ahead
Intel’s Q1 report shows that while operational execution is improving, the path to a full turnaround remains arduous. Stronger-than-expected earnings and data center growth were not enough to offset concern around tepid guidance and ongoing margin pressure.
With trade policy uncertainty, competitive threats in AI chips, and structural inefficiencies still in play, Intel needs more than just cost cuts to regain investor confidence. CEO Lip-Bu Tan’s restructuring plans mark a critical first step—but the market is waiting to see if it leads anywhere beyond just preserving the status quo.
