Intel is implementing cost-cutting, including "slow(ing) the pace of construction at a planned Ohio facility"

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Intel is implementing cost-cutting, including "slow(ing) the pace of construction at a planned Ohio facility" (archive.is)

Intel Corp. gave a stronger-than-anticipated revenue forecast for the current period, offering investors a glimmer of hope as they wait for a turnaround under new Chief Executive Officer Lip-Bu Tan.

Third-quarter sales will be $12.6 billion to $13.6 billion, the company said in a statement Thursday. Analysts on average had projected a number at the low end of that range.

Intel is benefiting from a resurgence in the personal-computer industry, driven in part by manufacturers’ efforts to build up inventory before tariffs hit. But the Silicon Valley pioneer still faces a variety of challenges. It has lost market share to rivals and is struggling to attract customers to its foundry business, which makes chips for outside clients. It also lacks products that can satisfy the massive demand for AI systems.

Intel’s stock rose about 2% in extended trading following the second-quarter results. For the year, it’s up 13%. That’s in line with the broader chip industry, but trails the performance of rivals such as Nvidia Corp. and Advanced Micro Devices Inc. Tan, who took the CEO job about four months ago, has been working to cut costs and reestablish Intel’s engineering-focused culture. The effort has included layoffs and the scaling back of a once-massive factory expansion. Intel further tapped the brakes in its earnings report on Thursday, saying it had canceled already-paused projects in Germany and Poland. The company will slow the pace of construction at a planned Ohio facility as well.

Smaller Staff The layoffs will reduce staff by 15%, and the company expects further cuts through attrition and the splitting off business units, Chief Financial Officer Dave Zinsner said in an interview. The chipmaker aims to end the year with 75,000 employees, down more than 20% from the end of the June quarter. Bloomberg News reported in April that Intel was looking to cut its workforce by roughly that amount. Intel expects a break-even third quarter in terms of profit, excluding some items. Analysts had estimated a 4-cent gain on that basis. In the second quarter, revenue amounted to $12.9 billion, little changed from a year earlier. Analysts had projected $11.9 billion. The company posted a loss of 10 cents a share, compared with an estimated profit of 1 cent. Analysts have expressed concern that stronger demand for PCs in the first half of the year won’t continue. The threat of tariffs imposed by the US — and other nations in retaliation — may have prompted PC makers to rush to stock up ahead of prospective cost spikes, the company warned last quarter.

Economic Fears Demand was stronger than expected last quarter because an economic slowdown didn’t materialize, Zinsner said. But the company is aware that some demand might have stemmed from consumers and businesses trying to avoid tariffs. “We felt like tariffs might be a headwind in the second quarter and would further unsettle the economy,” he said. “None of that transpired.” Intel’s client computing division had revenue of $7.9 billion last quarter, topping the average prediction of $7.3 billion. Data center sales were $3.9 billion, compared with a $3.7 billion estimate. The foundry division generated revenue of $4.4 billion, in line with projections. Intel had previously said it planned to cut operating expenses to about $17 billion this year and $16 billion in 2026. The Santa Clara, California-based company remains on track for the 2025 cuts, Intel said Thursday. Tan’s predecessor, Pat Gelsinger, had concentrated on expanding Intel’s factory network, once its key competitive advantage. He laid out plans to spend tens of billions of dollars on making its plants the best in the industry again, a status that would force rivals to use it as an outsourced provider of manufacturing. For now, the biggest user of its factories is Intel’s internal design teams. Some of Intel’s best offerings now contain components made by Taiwan Semiconductor Manufacturing Co., adding more pressure to its margins.

New Technology Intel’s CFO said a new production technique called 18A is progressing well and that more competitive chips will start to come out of its factories toward the end of the year. A successor technology called 14A will follow and be better suited to trying to attract outside customers.

Adjusted gross margin — the percentage of sales remaining after excluding the cost of production — was about 30% in the second quarter and will be 36% in the current period. That’s close to half of what it was when Intel’s chips dominated the data center market. Nvidia, which dominates the market for AI chips, has margins above 70%. Intel’s Zinsner said the company isn’t yet ready to unveil AI-related gear. The chipmaker is focusing on the development of products that will fit in unserved parts of the market.

Intel Corp. gave a stronger-than-anticipated revenue forecast for the current period, offering investors a glimmer of hope as they wait for a turnaround under new Chief Executive Officer Lip-Bu Tan. Third-quarter sales will be $12.6 billion to $13.6 billion, the company said in a statement Thursday. Analysts on average had projected a number at the low end of that range. Intel is benefiting from a resurgence in the personal-computer industry, driven in part by manufacturers’ efforts to build up inventory before tariffs hit. But the Silicon Valley pioneer still faces a variety of challenges. It has lost market share to rivals and is struggling to attract customers to its foundry business, which makes chips for outside clients. It also lacks products that can satisfy the massive demand for AI systems. Intel’s stock rose about 2% in extended trading following the second-quarter results. For the year, it’s up 13%. That’s in line with the broader chip industry, but trails the performance of rivals such as Nvidia Corp. and Advanced Micro Devices Inc. Tan, who took the CEO job about four months ago, has been working to cut costs and reestablish Intel’s engineering-focused culture. The effort has included layoffs and the scaling back of a once-massive factory expansion. Intel further tapped the brakes in its earnings report on Thursday, saying it had canceled already-paused projects in Germany and Poland. The company will slow the pace of construction at a planned Ohio facility as well. Smaller Staff The layoffs will reduce staff by 15%, and the company expects further cuts through attrition and the splitting off business units, Chief Financial Officer Dave Zinsner said in an interview. The chipmaker aims to end the year with 75,000 employees, down more than 20% from the end of the June quarter. Bloomberg News reported in April that Intel was looking to cut its workforce by roughly that amount. Intel expects a break-even third quarter in terms of profit, excluding some items. Analysts had estimated a 4-cent gain on that basis. In the second quarter, revenue amounted to $12.9 billion, little changed from a year earlier. Analysts had projected $11.9 billion. The company posted a loss of 10 cents a share, compared with an estimated profit of 1 cent. Analysts have expressed concern that stronger demand for PCs in the first half of the year won’t continue. The threat of tariffs imposed by the US — and other nations in retaliation — may have prompted PC makers to rush to stock up ahead of prospective cost spikes, the company warned last quarter. Economic Fears Demand was stronger than expected last quarter because an economic slowdown didn’t materialize, Zinsner said. But the company is aware that some demand might have stemmed from consumers and businesses trying to avoid tariffs. “We felt like tariffs might be a headwind in the second quarter and would further unsettle the economy,” he said. “None of that transpired.” Intel’s client computing division had revenue of $7.9 billion last quarter, topping the average prediction of $7.3 billion. Data center sales were $3.9 billion, compared with a $3.7 billion estimate. The foundry division generated revenue of $4.4 billion, in line with projections. Intel had previously said it planned to cut operating expenses to about $17 billion this year and $16 billion in 2026. The Santa Clara, California-based company remains on track for the 2025 cuts, Intel said Thursday. Tan’s predecessor, Pat Gelsinger, had concentrated on expanding Intel’s factory network, once its key competitive advantage. He laid out plans to spend tens of billions of dollars on making its plants the best in the industry again, a status that would force rivals to use it as an outsourced provider of manufacturing. For now, the biggest user of its factories is Intel’s internal design teams. Some of Intel’s best offerings now contain components made by Taiwan Semiconductor Manufacturing Co., adding more pressure to its margins. New Technology Intel’s CFO said a new production technique called 18A is progressing well and that more competitive chips will start to come out of its factories toward the end of the year. A successor technology called 14A will follow and be better suited to trying to attract outside customers. Adjusted gross margin — the percentage of sales remaining after excluding the cost of production — was about 30% in the second quarter and will be 36% in the current period. That’s close to half of what it was when Intel’s chips dominated the data center market. Nvidia, which dominates the market for AI chips, has margins above 70%. Intel’s Zinsner said the company isn’t yet ready to unveil AI-related gear. The chipmaker is focusing on the development of products that will fit in unserved parts of the market.

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