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On Thursday, Intel projected second quarter revenues to fall short of Wall Street expectations, overshadowing the initial financial results under new CEO Lip Beau Tan, amid a challenging trade conflict with China.
Intel’s stock price dropped by 5.8% in after-hours trading.
The company’s bleak forecast could further dampen investor sentiment, particularly those banking on Tan to revitalize the chipmaker after prolonged setbacks in penetrating the flourishing AI sector.
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Based in Santa Clara, California, Intel anticipates revenues ranging from $11.2 billion to $12.4 billion for the June quarter, compared to an average analyst estimate of $128.2 billion, per data collected by LSEG.
CFO David Zinsner mentioned that concerns over tariffs have prompted clients to hoard Intel chips, leading to a surge in sales during the first quarter. However, the company cannot ascertain profit levels and expects challenges in the second quarter.
Intel is predicting second quarter revenue to fall short of Wall Street projections on Thursday. (Reuters/Dadolvich/Reuters)
“Our guidance for the second quarter reflects the uncertainty driven by tariffs,” the finance chief commented.
In his efforts to streamline Intel and cut expenses, Tan announced that the operating expense target for 2025 has been reduced to about $17 billion, down from a previously indicated target of $17.5 billion, with a goal of reaching $16 billion in 2026.
“There’s a lot of Intel bureaucracy that has built up over the years,” Jinnah told Reuters. “He aims to eliminate that to enhance engineers’ efficiency and expedite product launches. We need to navigate through this process.”
The financial leader indicated that it remains uncertain how the restructuring plan will impact all employees, although more clarity will emerge once the company publishes its second quarter results.
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In a communication to staff prior to his inaugural conference call with analysts, CEO Tan stated that layoffs would commence in the second quarter, focusing on minimizing the company’s internal bureaucracy. Tan also plans to cut down on the quantity and scale of internal meetings.
“There’s no escaping the reality that these significant changes will decrease our workforce,” Tan conveyed. “As I mentioned upon my arrival, we need to make tough choices to secure our future.”
Starting September 1, Intel will mandate employees to report to the office four days a week, according to Tan’s memo.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| INTC | Intel Corp. | 21.49 | +0.90 |
+4.37% |
The firm also lowered its total capital spending projection for 2025 to $18 billion from the earlier target of $20 billion.
“Intel is taking steps to promote more efficient operations throughout the business. This initiative entails simplifying the structure and removing management layers,” the company asserted in a statement.
President Donald Trump has put tariffs on hold for now, but Beijing’s intense retaliation against US-made semiconductors has cast a shadow over Intel’s sales prospects in China, which is typically its largest market.
Chips produced in the US are expected to face over an 85% tariff, as noted by a state-backed China Semiconductor Industry Association notice at the beginning of April.
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China imports $10 billion worth of chips from the United States annually. Bernstein’s analysts estimate that the central processing unit (CPU) manufactured by US Intel amounts to approximately $8 billion.
Intel’s first quarter revenue reached $12.67 billion, surpassing the $1200 billion projection.
The company expects a consistent earnings adjustment for the second quarter compared to its earnings estimate of 6 cents per share.
“The cautious (second quarter) outlook integrates tariff uncertainty along with a competitive landscape for both PC clients and data center sectors,” remarked Kingaychan, Summit Insights Analyst.
Pat Gelsinger, former CEO of Intel. (Photographer: I-Hwa Cheng/Bloomberg via Getty Images)
Intel’s readiness to become a contract manufacturer for chips, a tactic previously supported by Tan’s predecessor Pat Gelsinger, has strained the company’s finances as it invests billions into creating advanced manufacturing facilities.
