Intel's Q1 revenue exceeded expectations, Q2 guidance was poor, and its annual capital expenditure target was lowered, and its stock price fell by more than 6% after the market | Financial News

Source: Wall Street Insights

Intel is attempting to revitalize its business under the leadership of its new CEO, Pat Gelsinger. However, the latest financial report shows that although the company's performance in the first quarter exceeded expectations, its outlook for the second quarter is weak. The company has also announced that it will lay off employees to cut costs and capital expenditures, making its operating structure more in line with the current strategy of scaling down its business. Affected by this, Intel's stock price fell by more than 6% after the market closed.

The following are the key points of Intel's first-quarter financial report:

**Main Financial Data**:

- **Revenue**: Intel's revenue in the first quarter was $12.67 billion, higher than the analysts' expected $12.31 billion.

- **Gross Profit Margin**: Intel's adjusted gross profit margin in the first quarter was 39.2%. In comparison, its gross profit margin exceeded 60% at its peak.

- **Loss per Share**: Intel reported a net loss of $800 million in the first quarter, with a loss of $0.19 per share, which was better than the analysts' expected loss of $0.22 per share.

**Business Segment Data**:

- **Foundry Business Revenue**: Intel's foundry business revenue in the first quarter increased by 7.1% year-on-year, reaching $4.67 billion, exceeding the market's expected $4.3 billion.

- **PC Chip Business Revenue**: Intel's PC chip division's revenue in the first quarter was $7.63 billion, a year-on-year decrease of 7.8%, but still higher than the expected $6.93 billion.

- **Data Center and AI Chip Business Revenue**: Intel's data center and AI chip business revenue in the first quarter was $4.13 billion, higher than the analysts' expected $2.96 billion.

**Second-Quarter Performance Guidance**:

- **Revenue**: Intel expects its revenue in the second quarter to be between $11.2 billion and $12.4 billion, far lower than the analysts' average expected $12.9 billion.

- **Gross Profit Margin**: Intel expects its adjusted gross profit margin in the second quarter to drop to 36.5%, lower than 39.2% in the first quarter. In comparison, its gross profit margin exceeded 60% at its peak.

- **Net Profit**: Intel expects to break even in the second quarter, falling short of the analysts' expected earnings per share of 6 cents.

This is the first financial report released since Pat Gelsinger took office as CEO. The veteran in the chip industry took office last month, replacing the former CEO Pat Gelsinger, who left due to continuous revenue decline and expanding losses. After the release of the financial report, Intel's stock price fell by 6% at one point after the market closed.

**The first-quarter performance was due to concentrated customer purchases before the implementation of tariffs, and the second quarter is expected to be weak**

Despite the poor outlook, Intel's revenue in the first quarter reached $12.7 billion, exceeding market expectations, making it another chip manufacturer whose performance exceeded expectations after Texas Instruments. However, the company admitted that this performance may only be a short-term boost due to concentrated customer purchases before the potential implementation of tariffs.

David Zinsner, Chief Financial Officer, said in a statement:

"The current macro environment is highly uncertain, which is also reflected in our outlook forecast. We are advancing investments in core products and foundry business with a prudent attitude, while striving to achieve operating cost savings and maximize capital efficiency."

Zinsner pointed out that due to customers' concerns about tariff increases, they placed orders in advance, which boosted the first-quarter performance. Therefore, the performance in the second quarter may be affected and weakened. Looking ahead, the company is worried that consumer spending and investments in areas such as data centers may slow down. At the same time, the increased uncertainty of tariffs has led the company to expand its financial forecast range.

The company said that the growth rate of AI computers will slow down, and US President Trump's tariff policies are increasing the possibility of an economic recession in the United States. Therefore, the company prudently assumes that the chip market will shrink.

**Plans for layoffs and cutting capital expenditures**

Intel said on Thursday that the company plans to cut operating and capital expenditures, and improve efficiency by streamlining the management layer. The cost reduction plan will be achieved through "streamlining the management hierarchy" to speed up the decision-making process.

Although the one-time cost required for this round of layoffs has not been estimated yet, Intel expects to reduce its overall capital expenditure target for 2025 from $20 billion to $18 billion. The adjusted operating capital expenditure target for the whole year will be cut by about $17 billion, and the expected net capital expenditure for the whole year is about $8 billion to $11 billion. The operating capital expenditure in 2026 will be further reduced to $16 billion.

Media previously reported that Intel plans to lay off more than 20% of its employees. However, Zinsner said that the total number of layoffs has not been determined yet.

This earnings conference call is also the first time that Pat Gelsinger has faced Wall Street analysts directly. He said:

"The first quarter is a positive starting point, but we are clearly aware that it will not be achieved overnight to regain market share and achieve sustainable growth. We are taking swift actions to strengthen execution and operational efficiency, and at the same time empower engineers to create excellent products. We will return to the basic principles, listen to customer needs, and drive the transformation to reshape Intel."

In addition, Intel expects a decline in foundry revenue, and the production capacity of 7-nanometer chips is constrained. To improve its financial situation, Intel has cut the budget for new factory and equipment expenditures by another $2 billion. Pat Gelsinger said that the company will focus on a few key areas and sell businesses that are not related to its core strategy.

This new round of layoffs is a further downsizing following the layoff of about 15,000 employees last year. The number of employees at Nvidia is about one-third of that at Intel, while Taiwan Semiconductor Manufacturing Company (TSMC) achieves revenue twice that of Intel with about 30,000 fewer employees.

**Hoping that Pat Gelsinger can turn the situation around**

Intel has missed the wave of AI computing in recent years. This golden growth period in the semiconductor industry has enabled Nvidia to take a huge lead, with its revenue and market value far exceeding those of Intel. However, against the backdrop of the overall slump in technology stocks, Intel's stock price has risen by about 7.2% so far in 2025, outperforming the Philadelphia Semiconductor Index, which has fallen by nearly 16%.

According to the financial report, Intel's revenue in the first quarter was $12.7 billion, better than analysts' expectations. But compared with the peak in 2021, Intel's annual revenue last year declined by about $26 billion, and its scale is now less than half of that of Nvidia. Analysts generally expect that it will be difficult for Intel to rebound in the short term.

Investors hope that Pat Gelsinger can reverse the situation of Intel's continuous loss of market share in the core processor market. Currently, Pat Gelsinger has started to restructure the senior management team. Last week, he appointed Sachin Katti, the former head of the network business unit, as the company's Chief Technology Officer and head of AI, leading Intel's overall AI strategy and product launch plan. He also said in a memorandum on Thursday that all Intel employees are required to work in the office for four days a week starting from September.

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