Intel has projected second-quarter revenue below Wall Street expectations, creating challenges for CEO Lip-Bu Tan during his initial earnings period amid ongoing Sino-U.S. trade tensions.
Shares of Intel fell by 5.8% in after-hours trading. This outlook could dishearten investors who are relying on Tan to rejuvenate the company, which has been struggling to secure its position in the rapidly growing AI market.
The company, headquartered in Santa Clara, California, anticipates revenue between $11.2 billion and $12.4 billion for the upcoming quarter, falling short of the $12.82 billion average estimate compiled by LSEG analysts.
David Zinsner, Intel’s CFO, noted that fears regarding tariffs led to increased demand for Intel chips, boosting first-quarter sales. However, the precise benefit remains undetermined, and the second quarter is expected to be impacted negatively.
Zinsner stated that the second-quarter guidance reflects the uncertainty caused by tariffs. To streamline operations and reduce costs, Intel plans to lower its adjusted operating expense target to around $17 billion in 2025, a decrease from the prior goal of $17.5 billion, with a further reduction to $16 billion by 2026.
Tan intends to cut through Intel’s existing bureaucracy to enhance engineering efficiency and product delivery speed. The full impact of these restructuring plans on the workforce size will be clarified in future results.
In a memo preceding his initial analyst conference call as CEO, Tan communicated planned layoffs starting in the second quarter, focusing on reducing internal bureaucracy and the frequency of internal meetings. Employees will be required to return to the office four days per week starting September 1.
Adjustments to Intel’s capital expenditures are also planned, with 2025’s target reduced to $18 billion from the previous $20 billion. The company aims to improve its operational efficiency by simplifying organizational structures and reducing management layers.
Despite current U.S. tariffs exempting chips, China’s high retaliatory tariffs on U.S. semiconductors threaten Intel’s sales in China, a key market. U.S.-made chips face potential tariffs of 85% or higher.
Annually, China imports $10 billion worth of U.S. chips, with $8 billion being central processing units assembled by Intel.
Intel’s first-quarter revenue remained steady at $12.67 billion, surpassing the $12.30 billion estimate. For the second quarter, Intel forecasts a break-even per-share adjusted profit, contrary to the 6 cents per share profit estimates.
The CFO highlighted that the second-quarter outlook reflects tariff-related uncertainties and competitive pressures in both the PC client and data center markets.
Intel’s strategic shift towards chip contract manufacturing, initiated by former CEO Pat Gelsinger, has placed financial stress on the company as it invests heavily in advanced manufacturing facilities.
