Track Hyper | Intel Q1 Report Card: Loss Doubles

Author: Zhou Yuan / Wall Street News

Another loss of over $800 million.

Counting this quarter, Intel has recorded losses for five consecutive fiscal quarters, marking the longest streak of continuous losses for Intel since 1990.

On April 25th, Beijing time, Intel released its Q1 2025 financial report: the quarter achieved revenue of $12.7 billion, flat year-on-year, exceeding the $12.3 billion expected by FactSet analysts.

In this quarter, Intel reported a net loss attributable to shareholders of $821 million (approximately RMB 6 billion), a year-on-year increase of 115%, with the loss greater than the $381 million in Q1 of last year. On a Non-GAAP basis, the adjusted net profit attributable to shareholders for the quarter was $600 million, a decrease of 24% compared to $800 million in the same period last year.

Intel's outlook for Q2 revenue and adjusted earnings per share did not meet expectations; at the same time, there are reports that Intel CEO Pat Gelsinger will push for the first layoffs since he took office, affecting about 20% of the current workforce, or approximately 20,000 people.

In an internal letter to all employees released on April 25th, Pat Gelsinger reiterated his reflections on Intel's organizational structure, company culture, and complex processes, stating, "The issues everyone sees are very consistent: we are too slow, too complex, and too stuck in our ways—this needs to change."

Under Gelsinger's leadership, Intel will focus on streamlining its structure, simplifying processes, and reducing costs to improve efficiency, stating, "These key changes will inevitably lead to an optimization adjustment of the workforce structure."

A Necessary Surgery

The performance of Intel's key financial indicators in the latest fiscal quarter reflects Intel's ability to maintain business stability in a complex market environment, while the significant deterioration in net profit reveals deep-seated structural issues: increased investment in advanced process R&D, high startup costs for foundry services, and declining profits in the client computing division.

By business segment, during the reporting period, the client computing division generated revenue of $7.629 billion, down 8% year-on-year; data center and AI achieved revenue of $4.126 billion, up 8% year-on-year; Intel's foundry services revenue was $4.767 billion, up 7% year-on-year; other businesses completed $943 million in revenue, up 47% year-on-year.

In terms of gross margin, the GAAP gross margin was 36.9%, down 4.1 percentage points year-on-year; the Non-GAAP gross margin was 39.2%, down 5.9 percentage points year-on-year.

The decline in gross margin is mainly due to product mix adjustments and losses in the foundry business. For example, the foundry services division incurred an operating loss of $2.32 billion, primarily due to high preparation costs for mass production at the 18A process node.

Cash flow for the quarter was decent, generating $800 million in cash from operating activities, indicating that daily operations still show resilience.

Pat Gelsinger stated in the employee letter, "Our current cost structure is still above industry benchmark levels. In light of this, we have adjusted our future operating expense and capital expenditure targets."

Public information shows that Intel's capital expenditure for 2025 is expected to be $20 billion, lower than the anticipated $23 billion. Among them, net capital expenditure is projected to be between $8 billion and $11 billion At the same time, Intel will lay off approximately 20,000 employees after the previous round of layoffs of 15,000, mainly focusing on the client computing and R&D departments.

Regarding the new round of layoffs that Chen Liwu is about to initiate, Wall Street Insight had already predicted in its April 1 report titled "Track Hyper | Intel's Chen Liwu Debut: Revival and Reconstruction."

At that time, a former Intel engineer told Wall Street Insight, "If Chen Liwu does not continue to lay off employees, the possibility of Intel's 'rebirth' is very small."

In an internal letter to all employees, Chen Liwu wrote: "It is thought-provoking that in Intel's management culture in recent years, many managers have placed the highest importance on the KPI metric of their team's size. However, from now on, this situation will no longer exist."

Chen Liwu believes that although Intel has many employees, it is inefficient, stating, "Upon reviewing the current situation, some teams have eight or more levels of management, which creates redundant processes and slows down our efficiency; I have always believed that the essence of excellent leadership lies in achieving outstanding output with a lean team."

Regarding Intel's current "decayed" corporate culture, Chen Liwu has proposed his "bone-scraping therapy" prescription: "I require my executive team to re-examine their organizational structures, focusing on reducing levels, broadening management spans, and empowering high-performing talent. Our competitors are streamlined, agile, and flexible, and we must be the same to enhance execution."

Chen Liwu's Challenges

In the first quarter of 2025, the revenue characteristics of Intel's various business segments are as follows: the client computing department (CCG) is experiencing "market share loss and weak demand," the data center and AI (DCAI) segment is seeing "growth driven by AI computing demand," and Intel Foundry Services (IFS) is facing "both scale expansion and losses."

Specifically, the client computing department (CCG) achieved revenue of $7.629 billion, a year-on-year decline of 8%, mainly affected by structural changes in the global PC market.

Although global PC shipments in Q1 2025 increased by 4.9% year-on-year (data source: IDC), Intel's market share fell from 66.3% in the same period last year to 56.3%, while AMD's share rose to 43.7% (data source: CPU-Z).

This trend is closely related to the hot sales of AMD's Ryzen 7 9800X3D processor, which became the most popular CPU in the market with a 4.3% share (data source: CPU-Z).

The decline in Intel's client business also reflects its product iteration speed lagging behind competitors, such as AMD's Zen 5 architecture, which has advantages in energy efficiency and AI performance.

Secondly, the data center and AI segment achieved revenue of $4.126 billion, an 8% year-on-year increase, mainly benefiting from the demand for AI servers and storage computing from large-scale cloud service providers.

Intel's Xeon 6 processors, with their built-in AMX acceleration engine, achieved a 1.9 times improvement in AI performance in the MLPerf benchmark tests, becoming a core choice for data center head node CPUs (data source: MLCommons).

However, this growth still faces dual pressure from AMD and Nvidia: AMD's data center revenue increased by 69% year-on-year, while Nvidia's data center revenue reached $22.6 billion, a year-on-year increase of 427%, highlighting Intel's insufficient competitiveness in the AI chip market Thirdly, Intel's foundry service revenue was $4.767 billion, a year-on-year increase of 7%, but it incurred an operating loss of $2.32 billion: the revenue growth mainly relied on internal customers (such as Intel itself using the Intel 7 node to produce processors), while the contribution from external customers (such as Amazon Web Services and Microsoft) has not significantly increased.

Although the Intel 18A process node has entered the customer validation stage, the mass production timeline is not expected until the second half of 2025, and the foundry business still needs to bear high capacity construction costs (such as the $32 billion investment in the Arizona wafer fab).

Finally, other businesses generated $943 million in revenue, a year-on-year increase of 47%, mainly from the divestiture gains of the Mobileye autonomous driving platform and NAND storage business.

Mobileye's shipment of the EyeQ6 chip in Q1 2025 increased by 35% year-on-year, but due to inventory adjustments in the automotive industry, this growth rate was still below expectations.

Chen Liwu stated in an all-staff letter, "I am well aware that this will be the most challenging job of my career." The cards he holds currently do seem quite average.

The challenges faced by Intel and Chen Liwu include the most pressing market pressure from the dual "oppression" of AMD and Nvidia.

Among them, AMD's client and data center segments have fully risen: the company's CPU market share has increased to 16.6% year-on-year, with the Ryzen 7 9800X3D processor becoming the best-selling model (data source: CPU-Z); in the data center field, AMD's EPYC processors may have increased their penetration rate in the cloud server market to 18% (data source: DigiTimes).

As for Nvidia, it is the absolute leader in today's AI chip market, and the gap between Intel and Nvidia needs no further elaboration.

As of April 25, Beijing time, Intel closed down 6.70%.

In addition to the net profit loss in Q1 and market rumors that Intel will initiate a new round of layoffs, another factor triggering market bearishness is the weak Q2 earnings guidance.

Intel expects Q2 revenue to be between $11.2 billion and $12.4 billion, with a median of $11.8 billion, far below analysts' expectations of $12.9 billion; gross margin is expected to further decline to 34.3% (GAAP), reflecting the continued impact of weak client demand and losses in the foundry business.

Intel's financial performance in Q1 2025 highlights the contradiction between declining traditional businesses and investments in emerging fields. The loss of market share in the client computing segment and high losses in the foundry business have become major drags, while growth in data centers and AI is insufficient to offset these pressures.

Although the strategic layout of the Intel 18A process and foundry business provides possibilities for long-term transformation, the short-term performance weakness and competitive pressure will still test the management's execution capability