As the first significant move under new CEO Lip-Bu Tan, Intel Corp. announced a turnaround plan late Thursday that aims to bring the company back to its technical roots. However, the prognosis, which included recession talk, caused its shares to plummet.
Intel’s first-quarter earnings report, which featured better-than-expected profits, detailed Tan’s new goals for the chip giant. In after-hours trading, however, Intel shares (INTC) were down roughly 4.4% as Wall Street concentrated on a poorer prognosis for the second quarter.
In order to facilitate quicker decision-making and concentrate on empowering engineering talent “so they make great products,” Tan’s approach calls for Intel to remove managerial layers. “We are going back to basics by listening to our customers and making the changes needed to build the new Intel.”
Tan wrote that many Intel teams are eight or more layers deep, “which creates unnecessary bureaucracy that slows us down,” in a message to staff members.
The corporation will be taking an unspecified charge in the second quarter, but it has not yet said how many job cutbacks the restructuring will include. Bloomberg said earlier this week that as part of Tan’s massive reorganization, Intel would be laying off about 22,000 employees.
The vice president of investor relations, John Pitzer, said it is too early in the process to comment on the number of job cutbacks.
Intel’s top executives provided a more comprehensive outlook for the second quarter, mentioning the present trade war’s volatility and the likelihood of an economic downturn, in addition to the company’s ambitions for the future. The business anticipates revenue to drop to between $11.2 billion and $12.4 billion in the second quarter compared to the first. According to FactSet, analysts had anticipated $12.8 billion in revenue.
Intel Chief Financial Officer David Zinsner stated, “The very fluid trade policies in the U.S. and beyond, as well as regulatory risks, have increased the chance of an economic slowdown, with the probability of a recession growing.” “This makes it more difficult to forecast how we will perform for the quarter and for the year, even as the underlying fundamentals supporting growth.”
With adjusted earnings of break-even, Intel reported that it will incur an as-yet-unidentified charge in the second quarter that is not included in its GAAP earnings-per-share projection for a loss of 32 cents per share. For the second quarter, Wall Street projected adjusted earnings of 7 cents per share.
Since they thought Intel’s first quarter would mark a low point in its turnaround, some analysts were also worried about the significantly lower second-quarter outlook.
“This is changing the way that we do business internally and really streamlining the business,” Pitzer told MarketWatch, adding that the cuts made by former CEO Pat Gelsinger “didn’t go after a cultural change like we are trying to do with this.”
These planned actions come after Gelsinger unveiled a cost-cutting program that included the elimination of 15,000 jobs last year.
The chipmaker thinks that the new strategy will increase its operational efficiency and execution. Intel has revised its 2025 operating expense estimate to $17 billion, down from $19.4 billion in 2024, by an extra $500 million. Its operational costs will drop to $16 billion in 2026. Additionally, it intends to reduce its capital expenditures by $2 billion to $18 billion.
Although Intel’s first-quarter revenue of $12.7 billion was flat year over year, it was higher than Wall Street’s prediction of $12.3 billion. In contrast to the FactSet expectation of 1 cent per share, the company’s adjusted earnings for the quarter were 13 cents per share. Despite some customers placing orders before tariffs, its PC division, often known as client computing, reported $7.6 billion in revenue, an 8% decline. Additionally, Intel revealed its largest quarter for data centers since December 2022. Order pull-ins from server manufacturers prior to tariffs may have also contributed to the 8% increase in data center revenue to $4.1 billion.
Additionally, Wall Street anticipated that Intel’s shipments to PC manufacturers would be marginally higher than anticipated during the quarter as a result of buyers stockpiling before the Trump administration’s tariffs.
“We believe Q1 revenue benefitted from customer purchasing behavior in anticipation of potential tariffs, though it is difficult to quantify the magnitude,” Zisner stated. Those similar customer pull-ins also helped Intel Foundry, the company’s manufacturing division.
This report was contributed to by Claudia Assis.
