Intel forecast second-quarter revenue below Wall Street estimates last night, casting a shadow over the first earnings report from Lip-Bu Tan, the new boss of the chipmaker.
The company, based in Santa Clara, California, has struggled to gain a foothold in the booming artificial intelligence market. It expects revenue of $11.2 billion to $12.4 billion for the June quarter, compared with analysts’ average estimate of $12.82 billion. Intel’s first-quarter revenue came in at $12.67 billion against forecasts of $12.30 billion.
Intel shares were $1.50, or 6.9 per cent, lower, at $20.03 in after-hours trading.
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“The current macro environment is creating elevated uncertainty across the industry, which is reflected in our outlook,” David Zinsner, Intel’s chief financial officer, said.
Amid Tan’s attempts to streamline the company and cut costs, Intel also said it is reducing its adjusted operating expense target to approximately $17 billion in 2025, down from its previously stated goal of $17.5 billion, and is now targeting $16 billion in 2026.
The company also reduced its gross capital expenditures target to $18 billion for 2025, down from its previous target of $20 billion.
“Intel is taking actions to drive better, more efficient execution across the business. The plan includes streamlining the organization, eliminating management layers,” the company said.
Intel, founded in 1968 and known for making chips for PCs and server processors, was the leading chipmaker in America for decades but has fallen behind rivals including Nvidia and Taiwan Semiconductor Manufacturing Company in the race to make the chips which power generative AI.
As recently as 2020, Intel was the world’s largest semiconductor company, with $77.9 billion in annual revenue.
While President Trump has for now spared chips from tariffs, Beijing’s high retaliatory levies on US-made semiconductors cloud the outlook for Intel’s sales to China, typically its largest market.
Chips manufactured in the US are set to face levies of 85 per cent or higher, based on the state-backed China Semiconductor Industry Association’s notice earlier in April.
China imports $10 billion worth of chips from the US annually. About $8 billion of these are central processing units assembled by Intel in America, according to Bernstein analysts.
Intel’s drive to become a contract manufacturer of chips, a strategy championed by Tan’s predecessor, Pat Gelsinger, has strained the company’s finances as it pours billions of dollars into setting up advanced manufacturing facilities.
