Intel's Q2 Earnings: Short Squeeze Potential Amid Ongoing Pain

The semiconductor industry has long been a theater of high-stakes bets, but Intel's Q2 2025 earnings report on July 24 has emerged as a focal point for a unique confluence of risk and reward. With short interest in the stock at 128.3 million shares (2.95% of the float) as of June 30—its highest level among peers like AMD and Qualcomm—and a short interest ratio (SIR) of just 1.41 days to cover, the stage is set for a volatile earnings season. The question now is whether a modest beat or operational progress under CEO Lip-Bu Tan's restructuring efforts could trigger a short squeeze, forcing bears to the sidelines and potentially unlocking value for longs.

Short Interest: A Double-Edged Sword

Short sellers have positioned themselves aggressively against Intel, drawn by a narrative of declining revenue, a negative operating margin, and a CEO tasked with turning around a company that has lost ground in the AI and CPU markets. Yet the very factors that have attracted bears—high short interest and low days to cover—also create a structural vulnerability. A short squeeze occurs when a stock's price rises sharply, forcing short sellers to buy shares to limit losses, which in turn accelerates the price increase. Intel's SIR of 1.41 is unusually low for a stock with a market cap of $80 billion, suggesting that even a modest 5-7% pop in the share price could trigger panic among shorters.

Institutional short positions, including those held by Goldman Sachs and Jane Street, add another layer of complexity. These players are likely hedged or leveraged, but their collective exposure could amplify a short-covering spiral if earnings surprise to the upside or if Tan's restructuring shows early traction. Off-exchange short volume data from FINRA also reveals that 33.18% of recent trading activity involves short sales, a sign of concentrated bearishness.

Restructuring: Pain as a Precursor to Gains

Tan's strategy is not just about cutting costs—it's about reengineering Intel's DNA. Since 2021, the company has slashed 15,000 jobs, reduced operating expenses by $1.5 billion, and adopted a 4-day workweek to boost productivity. These moves, while painful, are beginning to show in the numbers: capital expenditures have fallen to $18 billion for 2025, and the $8.5 billion CHIPS Act grant has provided a lifeline for next-gen manufacturing.

The market's skepticism, however, persists. Analysts project a Q2 loss of $0.14 per share and $11.97 billion in revenue, a 7% drop year-over-year. Yet these forecasts may not fully account for the operational improvements already underway. For example, Intel's Core Ultra Series 2 processors have achieved industry-first NPU compliance in AI benchmarks, and the Xeon 6 processor is outperforming rivals in memory-intensive workloads. If these innovations translate to better-than-expected gross margins or cost discipline, the earnings report could deliver a surprise.

The Short Squeeze Catalyst: A Modest Beat or Operational Clarity

A short squeeze doesn't require a home run—it just needs a spark. A modest beat on revenue or EPS, particularly in the context of a narrower-than-expected loss, could be enough to shake short sellers. For example, if Intel reports $12.2 billion in revenue (versus the $11.97 billion estimate) and narrows its loss to $0.10 per share, the stock could rally 7-10% on the day, triggering a cascade of short-covering.

Moreover, Tan's operational updates—such as progress on the 18A production node or the wind-down of the automotive business—could provide additional fuel. Investors are also watching for signs that the company's $1.5 billion in cost cuts are translating to improved cash flow, which would signal long-term sustainability.

Market Underestimation: Is the Squeeze Already Priced In?

While the Zacks Earnings ESP model currently reads -350% (bearish), the stock's 16% year-to-date gain and recent outperformance of the semiconductor sector suggest that some optimism is already priced in. However, the average price target of $21.85 implies a 6.1% downside, which may not reflect the full potential of a short squeeze. Options traders, meanwhile, are pricing in a 7.91% move either way, indicating anticipation of volatility but not necessarily a directional bet.

The key risk lies in the mismatch between short-term pain and long-term potential. If Tan's restructuring fails to materialize in the next few quarters, the stock could face renewed pressure. But if the Q2 report shows that cost discipline and AI innovation are gaining traction, the short interest could become a tailwind rather than a headwind.

Conclusion: A High-Risk, High-Reward Scenario

Intel's Q2 earnings present a classic high-stakes scenario. The elevated short interest and low days-to-cover ratio create a structural risk for short sellers, while Tan's restructuring efforts offer a potential catalyst for a modest but meaningful earnings surprise. For investors, the challenge is to balance the near-term risks of continued losses with the long-term potential of a company that is pivoting toward AI and operational efficiency.

If the market is underestimating the likelihood of a short squeeze—and the broader narrative of Intel's transformation—then the July 24 report could mark a turning point. For those willing to navigate the volatility, the combination of structural short interest and operational progress may create an opportunity worth the risk.