Navigating Challenges with Skill and Grace by Intel
In a recent financial update, Intel has shared its outlook for Q3 2025 and reported its performance for Q2 2025. The tech giant is facing challenges, but there are potential growth catalysts on the horizon.
Q3 2025 Outlook
Intel projects third-quarter revenue between $12.6 billion and $13.6 billion, slightly above analyst estimates of $12.64 billion[1][2]. However, the company forecasts a breakeven adjusted EPS, which is below the analyst estimate of $0.04[1][2]. The forecasted adjusted gross margin is 36%, somewhat below estimates of 37.3%[2]. Annual operating expenses are expected to be around $17 billion, aligning with estimates[4].
Q2 2025 Performance
In Q2 2025, Intel reported revenue of $12.86 billion, surpassing estimates of $11.88 billion and marking a 0.2% year-over-year increase[2]. The Client Computing segment saw $7.87 billion in revenue, exceeding expectations[2]. Despite this, Intel reported an adjusted loss of $0.10 per share, missing the expected EPS of $0.01 due to $800 million in impairment charges and $200 million in one-time costs[1][5].
Cost-cutting Measures and Competition
In response to these challenges, Intel is implementing cost-cutting measures. Tan, the company's CEO, is overseeing a 15% layoff, with almost all of these cuts already completed[1][5]. The company has also cut $5 billion in CapEx this year[3]. Intel is facing intense competition from AMD, Qualcomm, and Nvidia, which has impacted its stock performance[5].
Potential Growth Catalysts
Despite these challenges, Intel has potential growth catalysts. The 18A technology, which is the foundation for the next three generations for Client and DACI, is one such catalyst[6]. Tan has stated that all chip designs will personally pass through him[6]. Additionally, the President's recent AI Action plan could potentially benefit Intel's foundry ambitions[7].
Stock Performance
The stock is currently trading at a Price-to-Book lower than the peer group average, reflecting the market's cautious view of the company[8]. However, the stock is down 55% over the past year[8]. Intel has potential to break the sub-$30 range in H1'26[9].
Looking Ahead
In Q3, management is guiding for sales to $13.1B at mid-point[10]. Despite the challenges, Intel remains optimistic about its future. The company is halting chip factory projects and focusing on cost-cutting measures to improve its financial performance[11].
Footnotes
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- Barron's
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- Reuters
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Intel plans to invest in cost-cutting measures such as a 15% workforce reduction and a $5 billion decrease in CapEx for the year, as the company faces fierce competition from tech giants like AMD, Qualcomm, and Nvidia. In the meantime, potential growth catalysts for Intel include the implementation of the 18A technology and the President's recent AI Action plan. The stock is currently underperforming, trading below the peer group average and down 55% over the past year, but there is potential for recovery in H1'26.
