Intel’s Q1 earnings: painful losses highlight tough road ahead

Key points:

• Intel faces significant short-term challenges, driven by tariffs and weak demand forecasts, necessitating deep structural changes.
• AI competitiveness is critical—Intel urgently needs innovation to close the gap with rivals like Nvidia, or risks long-term decline.
• Investors should remain cautious and closely monitor progress on restructuring, tariff impacts, and AI product developments for signs of recovery.

Intel’s latest earnings report reveals a chip giant caught in turbulent waters. As the company’s new captain, CEO Lip-Bu Tan, steers through layoffs, tariffs, and intensifying competition, investors must navigate carefully—watching for signs of stability or further trouble ahead.

Earnings snapshot: a brief shine amid dark clouds

Intel posted first-quarter revenue of USD 12.7 billion, slightly better than analysts' forecasts (USD 12.3 billion). Adjusted earnings came in at 13 cents per share, comfortably beating the expected 1 cent. However, this silver lining can’t hide deeper cracks: Intel posted a heavy USD 821 million loss, its fifth consecutive losing quarter—the longest streak in more than three decades.

Looking ahead, Intel sees rougher seas: guidance forecasts Q2 revenue at only USD 11.2 to USD 12.4 billion, significantly below analyst expectations of nearly USD 12.8 billion, with profits likely flatlining at zero.

Tariffs and trade wars: a perfect storm

Behind these disappointing numbers lurks the shadow of President Trump’s tariffs—creating uncertainty that Intel CFO David Zinsner describes bluntly: “Fluid trade policies and escalating tariffs are increasing the likelihood of a recession.”

This environment encouraged customers to stockpile chips early, temporarily boosting Intel’s first-quarter sales. But this short-term gain is a double-edged sword—likely to depress demand dramatically in upcoming quarters.

Investors need clarity here. Tariffs don’t just raise prices—they spook businesses into tightening purse strings. That means fewer new computers bought, fewer chips needed, and potentially lower Intel revenues. Think of tariffs as a powerful headwind. Intel must find ways to push through this turbulence without losing altitude.

CEO Lip-Bu Tan: facing reality and trimming the sails

CEO Lip-Bu Tan took Intel’s helm last month and immediately began charting a new course. His brutally honest message to investors captures the challenge perfectly: “Clearly, there are no quick fixes. Stay tuned.”

Tan's turnaround plan includes deep and painful structural reforms: cutting jobs, flattening management layers, and significantly reducing spending. The aim? Revive Intel’s lost agility and innovation. He openly criticised the bureaucratic culture inherited from his predecessor: “Unnecessary bureaucracy is suffocating innovation... New ideas must breathe freely again.”

Intel will slash operating expenses by USD 500 million this year, aiming for USD 17 billion, with a further reduction to USD 16 billion next year. Capital expenditure will drop from USD 20 billion to USD 18 billion, scaling back ambitious plans for new chip plants.

Investors must recognise the cost-cutting as vital—but risky. Too deep, and Intel might compromise its future; too shallow, and it risks financial trouble in rough economic seas.

Losing the AI battle: Intel’s Achilles' heel?

The heart of Intel’s longer-term issue is AI. Competitor Nvidia dominates this booming sector, overshadowing Intel’s weaker "Gaudi" AI chips. Intel's crucial data-centre segment—where AI chips are in highest demand—grew 8% this quarter, but concerns linger that this growth was artificial, driven largely by tariff-driven panic buying.

To address this AI gap, Intel named Sachin Katti as Chief Technology Officer, tasked specifically with reviving Intel’s lagging AI strategy. For investors, it’s simple: Intel must deliver innovative AI products quickly, or risk becoming yesterday’s titan in tomorrow’s market. Picture Intel’s AI efforts as a high-stakes sprint—it must run faster now or risk permanent exclusion from the podium.

The big question for investors: stay the course or abandon ship?

The Intel stock has lost nearly 64% in the last five years, significantly trailing rivals Nvidia and AMD. Despite a small rebound this year, uncertainty remains high.

Investors should closely watch three crucial indicators going forward:

1. Tariff impact: Watch if US-China tensions escalate. Any easing in tariffs will be positive for Intel; escalation will likely hurt further.

2. AI product pipeline: Intel must rapidly release competitive AI chips. Any significant delays will widen the competitive gap.

3. Restructuring progress: Monitor if cost-cutting translates into efficiency gains, not just short-term profit relief. Watch for signs Intel can innovate quickly again.

Navigating Intel’s turnaround

Right now, Intel resembles a mighty ship struggling through stormy seas: leaks have sprung, sails torn by tariffs, rudder damaged by strategic missteps. Yet, a determined captain and decisive actions offer real hope.

Investors must remain vigilant, patient, and prepared for more volatility. Don’t abandon ship just yet—but be ready to act swiftly if the waters get rougher.

As CEO Tan wisely suggests, patience is crucial: “Stay tuned.” Intel’s journey back to calmer seas and clear skies has only just begun.