Chipmaker beats Q1 expectations, but outlook dims as customers hedge bets and new CEO flattens structure
Intel has warned that President Donald Trump’s escalating trade tariffs, along with foreign retaliatory measures, have significantly raised the probability of a global economic slowdown and potential recession. Speaking on the company’s first-quarter earnings call, CFO David Zinsner said “fluid trade policies” and regulatory risks were creating elevated uncertainty across the chip industry, leading some customers to stockpile ahead of expected cost increases.
Intel’s Q1 2025 revenue came in flat year-on-year at US$12.7bn, slightly ahead of expectations, while adjusted earnings per share reached US$0.13. However, its guidance for the second quarter was notably cautious, projecting revenue between US$11.2bn and US$12.4bn and adjusted earnings of break-even, citing tariff-related unpredictability and weakening demand.
Zinsner noted that trade restrictions were already impacting customer behaviour, with businesses and consumers showing signs of pulling back spending. While Intel maintains a diversified global manufacturing footprint—including production partnerships with TSMC in Taiwan and Samsung in Korea—it remains exposed to rising input costs and potential disruptions, particularly through imports of Chinese materials and European chipmaking machinery.
“The biggest risk we see,” Zinsner said, “is the impact of a potential pullback in investment and spending, as businesses and consumers react to higher costs and the uncertain economic backdrop.”
In response to the challenging environment, new CEO Lip-Bu Tan has announced sweeping internal reforms aimed at flattening Intel’s corporate structure, accelerating decision-making, and cutting costs. Operational and capital spending targets for 2025 have been lowered by a combined US$2.5bn, and the company will now require employees to work on-site four days a week from September. Tan said Intel would begin workforce reductions in Q2, but emphasised a focus on empowering top talent rather than pursuing headcount targets.
“Our competitors are lean, fast and agile—and that’s what we must become,” Tan told staff, highlighting a cultural reset toward engineering-led execution and customer focus. He reaffirmed Intel’s commitment to launching its Panther Lake chips by year-end, with a broader rollout into 2026, while scaling production of the advanced 18A process node.
Despite cost pressures, Intel believes customers may gravitate toward lower-cost, older-generation chips. CEO of Intel Products, Michelle Johnston Holthaus, acknowledged this shift but said the upcoming Panther Lake line would be competitively positioned in both performance and price.
Intel’s leadership also reiterated its AI ambitions, with the Xeon 6 line showing strong benchmark results. However, US regulatory scrutiny—including potential licensing requirements for AI chip exports to China—adds another layer of strategic complexity.
