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Intel (Nasdaq: INTC) has been on the road to recovery this year. This was the second quarter since the new CEO Lip-Bu Tan took over. Lip-Bu has been focused on making Intel’s products competitive again while driving efficiency across the organization.
 

Intel’s Financials

For the second quarter, revenues came in flat over the year at $12.86 billion, ahead of the market’s estimates of $11.92 billion. It ended the quarter with a $0.67 loss per share compared with a loss of $0.38 per share a year ago. On an adjusted basis, it ended the quarter with a loss of $0.10 per share, compared with the market’s expectations of an EPS of $0.01 per share.

By segment, Intel’s Client Computing Group, which is primarily comprised of sales of central processors for PCs, saw sales slide 3% to $7.9 billion. Revenue in the Data Center Group, which includes some AI chips, grew 4% to $3.9 billion. Foundry revenues were up 4% to $4.4 billion. Other revenues grew 20% to $1.1 billion.

For the third quarter, Intel expects revenues of $12.6-$13.6 billion, with the mid-point ahead of the market estimates of $12.65 billion. It expects this to be a break-even quarter, falling short of the market’s estimated earnings of $0.04 per share.
 

Intel’s Turnaround Focus

As part of its turnaround focus, Intel is looking at four key areas. First, it is reducing inefficiencies within the organization by eliminating bureaucratic middle layers of management. The company is targeting an end of the year headcount of 75,000, down from 108,900 employees as of December 2024.

Second, it is revisiting the capacity planning for its foundry business. The foundry business reported an operating loss of $3.17 billion for the quarter. To contain these losses, Intel has announced several spending cuts. It cancelled planned fab projects in Germany and Poland and will be consolidating its testing and assembly operations in Costa Rica to Vietnam and Malaysia. It is also slowing down the pace of its construction of the chip factory in Ohio, to be aligned with market demand.

Intel believes that in the past it had invested in building out capacity without adequate demand, resulting in fragmented and underutilized production facilities. It is looking to address those inefficiencies through consolidation and better planning in the future.

Third, it is making sure its products more competitive. It is working on Intel 18A, the foundation of at least the next three generations of Intel client and server products. Intel 18A and Intel 18A-P are expected to drive meaningful wafer volumes into the next decade. Its foundry and product teams are focused on enabling Panther Lake, Core Ultra Series 3 desktop, and mobile processors, to be launched by year-end. Panther Lake will be followed by additional SKUs in the first half of 2026. Within server products, it is seeing strong opportunities in AI host nodes and storage and is working to improve its offerings within hyperscale workloads where performance per watt is a key differentiator.

Finally, within AI, Intel realizes that it will need to diversify beyond the traditional silicon- and training-centric mindset. While it needs to build and consolidate upon its silicon franchise based upon the x86 CPUs and the Xe GPUs, it sees the need to move up the stack into system and software. Intel plans to incubate these two segments and grow these important skill sets and capabilities as it believes these are vital for Intel to stay relevant in the next wave of computing. Additionally, it is focusing on understanding emerging and real AI workloads to be able to design software, systems, and silicon to enable the best outcomes for those particular workloads.

Besides the overall strategic turnaround, Intel has also seen a lot of ownership change in the recent months. Earlier last month, the US government announced plans to invest $8.9 billion for a 10% stake in Intel. The agreement is expected to be a part of the government’s plans to boost semiconductor manufacturing in the US and establish the country as a leader in the industry.

And then, yesterday, rival Nvidia announced plans to invest $5 billion for a nearly 4% stake in Intel as well. The investment is part of Intel’s deal with Nvidia to jointly develop custom data center and personal computing products that accelerate applications and workloads across hyperscale, enterprise and consumer markets. The market is very pleased with Nvidia’s investment as it puts Intel ahead in running in the AI market. The deal brings together Nvidia’s AI and accelerated computing stack with Intel’s CPUs and the x86 ecosystem to bring forth a potential powerhouse focused on managing AI workloads.

Its stock is trading at $30.57 with a market cap of $142.77 billion. It hit a 52-week high of $32.38 yesterday, buoyed by the Nvidia announcement. The stock has climbed from the 52-week low of $17.67 that it was trading at in April this year.

Prior to joining Intel, Lip-Bu has led other tech companies, and has been a Venture Capitalist. When he first became CEO of Cadence after being a VC for decades, I met with him. I asked him why he took the job. He had said that he wanted to prove to his son that he was capable of doing a real job, not just be a VC. He did an excellent job at Cadence, and I think he’s a great choice to lead Intel.

I think that Intel needs to become a fabless semiconductor company. During the result announcements, it revealed that if it failed to see customer traction, it may halt development beyond the 18A node. It has already tabled the idea of its 14A node citing the lack of external customers. It is too early to comment on the longer term strategy behind Intel’s moves, but it would make for an interesting play in the fabless market.

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