Intel Corporation (NASDAQ: INTC)

Intel’s second quarter 2025 results reflected the company’s ongoing transformation challenges, with revenue flat at $12.9 billion compared to $12.8 billion in Q2 2024. While top-line performance showed stability, the company faced significant margin pressure and operational headwinds that severely impacted profitability metrics.

Gross margin declined substantially, with GAAP gross margin falling to 27.5% from 35.4% in the prior year, representing a decrease of 790 basis points. Non-GAAP gross margin fared similarly, declining 900 basis points to 29.7%. This compression was driven by several factors, including approximately 800 basis points of impact from $800 million in non-cash impairment and accelerated depreciation charges related to excess manufacturing tools.

Operating performance was particularly challenging, with GAAP operating loss of $3.2 billion compared to a loss of $2.0 billion in Q2 2024. The company’s restructuring efforts resulted in $1.9 billion in charges during the quarter, reflecting the substantial workforce reduction and organizational changes underway. These charges impacted GAAP EPS by $(0.45) per share.

On a non-GAAP basis, the company reported an operating loss of $503 million, compared to operating income of $24 million in the prior year period. This deterioration reflects the underlying pressure on Intel’s core business segments amid increased competition and market challenges.

Cash flow generation remained positive with $2.1 billion in operating cash flow, though down from $2.3 billion in the prior year. The company’s balance sheet remained solid with $9.6 billion in cash and cash equivalents, providing financial flexibility during this transformation period.

Client Computing Group (CCG) revenues declined 3% year-over-year to $7.9 billion, reflecting continued challenges in the PC market. The segment faced headwinds from both macroeconomic factors affecting consumer and commercial PC demand, as well as increased competitive pressure from AMD and ARM-based processors. Despite revenue decline, CCG maintained strong operating income of $2.1 billion, demonstrating the segment’s profitability even in challenging conditions.

Data Center and AI (DCAI) showed modest growth with revenue increasing 4% to $3.9 billion. While the segment benefited from continued demand for AI and data center infrastructure, Intel faced significant competitive pressure from NVIDIA and AMD in high-performance computing applications. The launch of Intel® Xeon® 6 series processors provided some momentum, particularly with adoption in NVIDIA’s DGX B300 systems, but market share challenges persisted.

Intel Foundry continued to be a significant drag on overall performance, generating $4.4 billion in revenue (up 3%) but posting an operating loss of $3.2 billion, significantly worse than the $2.8 billion loss in Q2 2024. The foundry business struggled with capacity utilization issues, manufacturing process delays, and the substantial investments required to compete with TSMC and Samsung in advanced process nodes.

All Other segments, including Altera and Mobileye, showed strong growth of 20% to $1.1 billion in revenue. This category provided a bright spot with positive operating income, reflecting the value of Intel’s diversified portfolio beyond core CPU and foundry operations.

The segment performance highlighted Intel’s need to focus resources on areas where it can maintain competitive advantages while addressing the substantial losses in the foundry business that are weighing on overall company performance.

Intel made significant progress on its comprehensive restructuring program designed to improve operational efficiency and financial performance:

2025 Restructuring Plan Progress

• Workforce Reduction: Completed the majority of planned headcount actions to reduce core workforce by approximately 15%, targeting a year-end workforce of about 75,000 employees
• Organizational Changes: Created a faster-moving, flatter, and more agile organization structure to improve decision-making and execution
• Cost Target: On track to achieve $17 billion non-GAAP operating expense target for 2025, with further reduction to $16 billion targeted for 2026
• Financial Impact: Recognized $1.9 billion in restructuring charges in Q2 2025, excluded from non-GAAP results

Manufacturing Footprint Optimization

Intel announced significant changes to its global manufacturing strategy to improve capital efficiency:

• Cancellation of planned projects in Germany and Poland to optimize capital deployment
• Consolidation of assembly and test operations in Costa Rica into larger sites in Vietnam and Malaysia
• Slowing the pace of construction in Ohio to align spending with market demand
• Targeting gross capital expenditures of $18 billion for 2025, down from previous projections

Technology and Product Development

• Xeon 6 Series Launch: Introduced three new Intel® Xeon® 6 processors with customizable CPU core frequencies for AI workloads
• Panther Lake Progress: First processor SKU remains on track to begin shipping later in 2025, with additional SKUs in H1 2026
• Intel 18A Milestone: Reached production wafer milestone in Arizona, demonstrating progress on advanced process technology
• Leadership Appointments: Made key appointments including Greg Ernst as Chief Revenue Officer and other engineering leadership roles

Asset Monetization

Intel continued efforts to strengthen its balance sheet through strategic asset sales:

• Sold 57.5 million Mobileye Class A shares via secondary offering in July 2025, adding approximately $922 million to the balance sheet
• Maintained majority ownership in Mobileye while monetizing partial stake
• Continued evaluation of other non-core asset monetization opportunities

Intel provided Q3 2025 guidance that reflects continued near-term challenges while showing progress on cost reduction initiatives:

Q3 2025 Guidance

• Revenue: $12.6-$13.6 billion (midpoint of $13.1 billion)
• GAAP gross margin: 34.1% (improvement from Q2 2025)
• Non-GAAP gross margin: 36.0% (significant sequential improvement)
• GAAP EPS: $(0.24)
• Non-GAAP EPS: $0.00 (return to breakeven on adjusted basis)
• GAAP tax rate: (23%)
• Non-GAAP tax rate: 12%

Full-Year 2025 Targets

• Non-GAAP operating expenses: $17 billion (down from higher levels in prior years)
• Gross capital expenditures: $18 billion (optimized from previous plans)
• Net capital expenditures: $8-$11 billion (after government incentives and partner contributions)

2026 Outlook

• Non-GAAP operating expenses target: $16 billion (further $1 billion reduction)
• Continued focus on capital efficiency and margin improvement
• Expected benefits from restructuring initiatives to become more apparent

The guidance reflects Intel’s expectation that Q3 2025 will show meaningful improvement in gross margins as the company moves past one-time charges and begins to realize benefits from its restructuring efforts. The return to non-GAAP breakeven in Q3 would represent a significant improvement from the $(0.10) loss in Q2 2025.

Management emphasized that while the transformation will take time, the company sees clear opportunities to enhance competitive positioning, improve profitability, and create long-term shareholder value through its strategic initiatives.