Intel: Selling assets with one hand and laying off employees with the other—can a leadership change save them?

Intel released its Q1 2025 earnings report (ending March 2025) after the U.S. market close on April 25, 2025, Beijing time. Key highlights:

1. Core metrics: Flat revenue, gross margin slides again. Intel reported Q1 2025 revenue of $12.67 billion, essentially flat YoY, near the upper end of guidance ($11.7-$12.7B). Client computing declined, but growth in Data Center & AI and other segments largely offset it. $Intel(INTC.US) posted a net loss of -$820 million in Q1 2025, with widening losses primarily due to gross margin erosion and increased non-recurring charges.

2. Segment performance: Client keeps losing share; AI and foundry hold potential. The company again adjusted segment reporting, reclassifying Intel's product businesses into Client Computing and Data Center & AI segments.

1) Client Computing: Q1 revenue fell 7.8% YoY to $7.63B. While global PC shipments grew +5.9% YoY, Intel's related revenue dropped -7.8%, indicating continued market share loss.

2) Data Center & AI: Revenue grew 7.8% YoY to $4.13B, driven by Xeon server sales and customers stockpiling ahead of potential tariffs.

Traditional server and Altera businesses declined this quarter, showing no benefit from AI industry growth.

3) Intel Foundry: Revenue reached $4.67B, but with ~$4.7B in internal offsets, most wafer production still serves internal needs with minimal external customers.

3. Guidance: Q2 2025 revenue forecast of $11.2-$12.4B (vs. consensus $12.88B) and GAAP gross margin of 34.3% (vs. consensus 32.7%), both indicating sequential declines.

Overall view: Internal restructuring remains the focus amid stagnant performance

While Intel's earnings beat expectations with revenue near guidance highs and better-than-expected margins, fundamentals show no real improvement. Forward guidance suggests continued revenue and margin erosion with no near-term turnaround.

Post-CEO transition, reporting segments were again restructured—Network & Edge is no longer separately disclosed. Intel's product businesses now split clearly into Client Computing and Data Center & AI. Details: 1) Client remains weak, underperforming the +5.9% PC market growth as AMD keeps gaining share; 2) Data Center & AI growth came from Xeon demand and tariff-related inventory builds, but still lacks presence in core AI GPUs; 3) Foundry remains internally focused with minimal external customers.

New CEO Pat Gelsinger reaffirmed focus on core x86, Data Center & AI, and 18A process development, aligning with the new segment structure. All businesses show no recovery signs, while internal reforms dominate—segment realignment, ongoing layoffs (headcount down 28K YoY), and opex cuts ($1.3B reduction).

The company recently agreed to sell 51% of Altera to Silver Lake at an $8.75B valuation (vs. 2015's $14.45B acquisition price), with plans for an eventual Altera IPO. This loss-making divestiture underscores Intel's focus on core businesses.

Intel's three core segments (Client, Data Center & AI, Foundry) all show weak performance. Post-leadership change, internal reforms—restructuring, cost cuts, and asset sales—aim to sharpen focus. Client defends traditional strengths, while Data Center & AI and Foundry offer future growth potential.

However, three key challenges persist (AMD's competition in traditional markets, lack of GPU/AI traction, minimal external foundry customers), continuing pressure on revenue and margins. With gross margins needing to exceed 45% to avoid losses, breakthroughs in these areas could restore market confidence.

Dolphin Research's detailed analysis:

1. Core metrics: Flat revenue, margin erosion continues

1.1 Revenue: Q1 revenue of $12.67B (-0.4% YoY), near guidance 上限 ($11.7-$12.7B). Data Center & AI growth offset Client declines.

1.2 Gross profit: $4.67B (-10.4% YoY) on margin compression.

Gross margin fell 410bps YoY to 36.9%, beating consensus (32.2%). Seasonality and weaker Client margins drove the decline.

Last quarter's "flash crash" to 15% margins included $3.1B in one-time charges. Adjusted operating margin was 38.4%.

1.3 Opex: $4.973B (-20.9% YoY) as headcount fell from 109K to 103K sequentially.

Details:

1) R&D: $3.64B (-16.9% YoY), 28.7% of revenue—still the largest expense despite cuts.

2) SG&A: $1.18B (-16.9% YoY), 9.3% of revenue.

3) Restructuring: $160M.

1.4 Net income: -$820M loss on margin pressure and non-operating charges.

Operating loss was -$300M, worsening despite cost cuts.

2. Segment deep dive: Client share loss continues; AI and foundry hold promise

Post-CEO change, Intel reorganized reporting segments into Client, Data Center & AI, Foundry, and All Other. Network & Edge is no longer broken out; Altera and Mobileye now sit in All Other.

The restructuring highlights Client and Data Center as Intel's revenue pillars, with Foundry still primarily serving internal needs.

2.1 Client Computing

Revenue fell 7.8% YoY to $7.629B amid market share losses to AMD.

Note: Some former Network & Edge revenue was reclassified into Client this quarter.

Per IDC, Q1 global PC shipments rose 5.9% YoY to 63.2M units, but Intel's Client revenue fell -7.8%, indicating further share erosion.

CPU-Z data shows Intel's CPU share at 56.3% as of April 1, 2025 (down 10pp YoY). While still dominant in PC CPUs, AMD keeps gaining ground.

2.2 Data Center & AI

Revenue grew 7.8% YoY to $4.126B on Xeon demand and tariff-related inventory builds.

Altera was previously spun out, while some Network & Edge revenue was folded into this segment.

On April 14, 2025, Intel agreed to sell 51% of Altera to Silver Lake at an $8.75B valuation (vs. 2015's $14.45B purchase price), targeting a 2025 close and eventual IPO. This divestiture reflects both Altera's struggles and Intel's need to fund core R&D (e.g., process tech, Data Center expansion).

While Google's capex grew 43% YoY to $17.2B, its GCP Next event highlighted cooling customer demand—a risk factor. Intel remains underrepresented in GPUs/ASICs, the AI market's growth engines.

2.3 Intel Foundry

Revenue rose 7.1% YoY to $4.67B, but with $4.7B in internal offsets, external foundry business remains minimal.

Despite weak external traction, the new CEO prioritizes 18A process development, aligned with U.S. manufacturing reshoring trends. Market expectations stay low, but 18A execution could change the narrative.