The biggest single issue most chip companies are grappling with this earnings season is assessing how a global trade war and its residual economic chaos will impact their prospects for the rest of 2025. For Intel, gauging the effect of tariffs is indeed an issue, but the bigger and more immediate challenge it faces is righting its own corporate ship.
In reporting first quarter 2025 earnings this week–the first earnings posting since Lip Bu Tan was named CEO–Intel focused on how it is doing that by streamlining its upper-level organizational structure and cutting costs.
Tan, speaking during the company’s Q1 earnings call, was blunt in his assessment of how Intel’s dense management structure has worked against itself, and how he will change it.
“There are many areas we need to improve, and there's no quick fixes,” Tan said. “We must remain laser focused on execution. One of my biggest learnings so far is that we need to fundamentally transform our culture and the way in which we operate. Organizational complexity and bureaucracy have been suffocating the innovation and agility we need to win. It takes too long for decisions to get made, and new ideas and the people who generate them have not been given the room or resources to incubate and grow them. Unnecessary silos have led to bad execution.”
Tan said he is dismantling these structural and cultural impediments. “We will empower smaller teams to move faster and make better decisions, and we will significantly reduce the number of layers,” he said, adding, “As a first step… all critical product manufacturing and MG&A [marketing, general and administrative] functions, which were spread over two to three layers before, are now directly reporting to me. This will allow me to get closer to our product and engineering groups, and work directly with them… I will apply the same streamlining approach across the company, with a focus on empowering our engineering talents to create great products and make it easier for our customers to do business with us.”
In connection with these and other actions, the company said it is “reducing its non-GAAP 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. Operating expenses include research and development (R&D), and marketing, general and administrative. Intel expects to have restructuring charges associated with these actions, some of which may be included in its non-GAAP results… Additionally, further operational efficiencies and better utilization of construction-in-progress assets allow Intel to reduce its gross capital expenditures target to $18 billion for 2025, down from the company's previous target of $20 billion, while still expecting net capital expenditures2 of approximately $8 billion to $11 billion. Intel will continue to focus investment in its core business as it drives operational efficiency.”
While the company will conduct more layoffs as part of this expense-cutting effort, Intel did not say how many jobs will be cut. Published reports prior to the earnings report alluded to the possibility that Intel could eliminate as many as 20,000 jobs, or about 20% of its global workforce.
The sweeping plan for structural and cultural change at the American technology icon comes as Intel actually did pretty well in Q1. For the quarter, Intel posted $12.7 billion in overall revenue, roughly flat against the same period a year ago, beating consensus estimates of around $12.3 billion. Revenue from the company’s Client Computing Group led the way, coming in at about $7.6 billion, while about $4.1 billion of that take came from Intel’s Data Center and AI business. Both units reported revenue above expectations, but this also was the first quarter since Intel merged aspects of its Network and Edge business into each of these groups. Meanwhile Intel Foundry pulled in about $4.7 billion in revenue for Q1 2025, slightly beating reported expectations of around $4.3 billion. The company posted an overall net loss of $800 million for the quarter.
Tan said in a statement that the company’s first quarter was “a step in the right direction,” but complicating this observation was the fact that Intel also issued a second quarter outlook that disappointed analysts. The company said Q2 revenue is likely to land between $11.2 billion and $12.4 billion, but according to several reports, the consensus expectation on the guidance was closer to $12.8 billion.
“Our goal now is to build on this progress, but it won't be easy,” Tan said.