Intel's predicted earnings fail to meet expectations, intensifying concerns about tariffs.
Art Hogan, B. Riley Wealth Management's chief market strategist, spills the deets on what it takes to seize stocks in a volatile market on 'Making Money.'
Intel, the tech titan, calls a pessimistic tune on second-quarter revenue, falling short of Wall Street's estimates on Thursday, with Lip-Bu Tan's debut earnings as CEO overshadowed by the raging Sino-U.S. trade war. Shares plummeted 5.8% in after-hours trading.
Tan's soaring expectations to transform the chipmaker could be dampened by Intel's grim outlook, with investors relying on the new CEO to resurrect Intel after years of missteps and a weak footing in the booming AI market.
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The Santa Clara, Cali-based company anticipates revenue of $11.2 billion to $12.4 billion for the June quarter, contrasting analysts' average estimate of $12.82 billion, according to LSEG. Tariffs drove customers to stockpile Intel chips, which boosted sales in the first quarter, but this windfall won't repeat itself in the second quarter.
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In his inaugural conference call with analysts as CEO, Tan revealed that layoffs would begin in the second quarter. He plans to slash internal bureaucracy and cut the number and size of internal meetings.
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"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."
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Beginning September 1, Intel will enforce a return to the office 4 days a week.
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The Lowdown: Intel's stellar movement amid rough waters
As a result of the restructuring, Intel has reduced its adjusted operating expense target to approximately $17 billion in 2025, down from the previously stated goal of $17.5 billion, and is now targeting $16 billion in 2026. The company has also slashed its gross capital expenditures target to $18 billion for 2025, down from the previous target of $20 billion.
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While U.S. President Donald Trump's trade tactics have, for now, given chips a reprieve, Beijing's hefty tariffs on U.S.-made semiconductors threaten Intel's Chinese sales, historically its largest market. Chips made in the U.S. face levies of 85% or higher, based on the China Semiconductor Industry Association's notice in April. Research shows China imports $10 billion worth of chips from the United States annually, with about $8 billion being Intel-assembled CPUs.
Intel's events in Q1: Flat revenue at $12.67 billion, exceeding estimates of $12.30 billion. The company expects second-quarter per-share adjusted profit to break even, contrasting estimates of profit of 6 cents per share.
Analyst Kinngai Chan of Summit Insights posits that the cautious outlook reflects uncertainty due to tariffs and the competitive environment in both the PC client and the datacenter markets.
Intel's aim to become a contract manufacturer of chips, a cause championed by Tan's predecessor Pat Gelsinger, has put a strain on the company's finances as it dives headfirst into constructing advanced manufacturing facilities.
- Art Hogan, the chief market strategist at B. Riley Wealth Management, discussed the tactics required to seize stocks in a volatile market on 'Making Money.'
- Intel, the technology giant, announced a pessimistic outlook for its second-quarter revenue, which fell short of Wall Street's estimates, and its shares dropped 5.8% in after-hours trading.
- New Intel CEO Lip-Bu Tan plans to slash internal bureaucracy, cut the number and size of internal meetings, and begin layoffs in the second quarter to put the company on a solid footing for the future.
- Beginning September 1, Intel will enforce a return to the office 4 days a week.
- The restructuring at Intel has led to a reduction in its adjusted operating expense target to approximately $17 billion in 2025, down from the previously stated goal of $17.5 billion, and a slash in its gross capital expenditures target to $18 billion for 2025, down from the previous target of $20 billion.
- U.S. President Donald Trump's trade tactics have, for now, given chips a reprieve, but Beijing's hefty tariffs on U.S.-made semiconductors threaten Intel's Chinese sales.
- Analyst Kinngai Chan of Summit Insights attribute Intel's cautious outlook to uncertainty due to tariffs and the competitive environment in both the PC client and the datacenter markets.
