Intel forecast falls short of estimates amid trade war concerns

Bengaluru/San Francisco — Intel forecast second-quarter revenue below Wall Street estimates on Thursday, casting a shadow over new CEO Lip-Bu Tan’s first round of earnings at the helm, against the backdrop of a raging Sino-US trade war.

Intel shares were down 5.8% in extended trading.

The dour outlook from Intel could be another source of pessimism for investors who are counting on Tan to turn the chipmaker around after years of missteps have left it struggling to gain a foothold in the booming AI market.

The Santa Clara, California-based company expects revenue of $11.2bn to $12.4bn for the June quarter, compared with analysts’ average estimate of $12.82bn, according to data compiled by LSEG.

Fears around tariffs pushed customers to stockpile Intel chips, which boosted sales in the first quarter, CFO David Zinsner said. The company was not able to determine the amount of the benefit, and it expects the second quarter to suffer as a result.

“Our guidance this quarter, in the second quarter, is a reflection of this uncertainty caused by tariffs,” the finance chief said.

Amid Tan’s attempts to streamline the company and cut costs, Intel also said it is reducing its adjusted operating expense target to about $17bn in 2025, down from its previously stated goal of $17.5bn, and is now targeting $16bn in 2026.

“There’s a lot of Intel bureaucracy that has been built up over time,” Zinsner said. “He wants to cut through all of that to make engineers more successful and allow them to more quickly bring out products. We’ve got to go through all of that.”

The finance chief said it was not yet certain what impact the restructuring plans would have on the overall employee count but that clarity would emerge when the company reports second-quarter results.

In a memo to employees ahead of his first conference call with analysts as CEO, Tan wrote that layoffs would begin in the second quarter and that such changes would focus on reducing the company's internal bureaucracy. Tan also plans to slash the number and size of internal meetings.

“There is no way around the fact that these critical changes will reduce the size of our workforce,” Tan wrote. “As I said when I joined, we need to make some very hard decisions to put our company on a solid footing for the future.”

Beginning on September 1, Intel will require employees to return to the office four days a week, Tan’s memo said.

The company also reduced its gross capital expenditures target to $18bn for 2025, down from the company's previous target of $20bn.

“Intel is taking actions to drive better, more efficient execution across the business. The plan includes streamlining the organisation, eliminating management layers,” the company said in a statement.

While US President Donald Trump has for now spared chips from tariffs, Beijing's high retaliatory levies on US-made semiconductors cloud the outlook for Intel's sales to China, typically its largest market.

Chips manufactured in the US are set to face levies of 85% or higher, based on the state-backed China Semiconductor Industry Association’s notice earlier in April.

China imports $10bn worth of chips from the US annually. About $8bn of these are central processing units (CPUs) assembled by Intel in the US, according to Bernstein analysts.

Intel’s first-quarter revenue was flat at $12.67bn. The results beat estimates of $12.30bn.

The company expects second-quarter per-share adjusted profit to break even, compared with estimates of profit of 6c per share.

“The cautious (second quarter) outlook incorporates tariff uncertainties coupled with the competitive environment in both the PC client and the datacenter markets,” Summit Insights analyst Kinngai Chan said.

Intel’s drive to become a contract manufacturer of chips, a strategy championed by Tan’s predecessor, Pat Gelsinger, has strained the company’s finances as it pours billions of dollars into setting up advanced manufacturing facilities.

Reuters