Intel forecast falls short of estimates, fanning tariff worries

Core Viewpoint - Intel's second-quarter revenue forecast falls short of Wall Street estimates, raising concerns about new CEO Lip-Bu Tan's ability to revitalize the company amid ongoing trade tensions between the U.S. and China [1] Financial Performance - Intel's first-quarter revenue was flat at $12.67 billion, surpassing estimates of $12.30 billion [11] - The company anticipates second-quarter adjusted profit per share to break even, contrasting with estimates of a profit of 6 cents per share [11] Revenue Guidance - Intel expects second-quarter revenue to be below Wall Street's average estimate of $12.82 billion, projecting between $11.2 billion and $12.4 billion [2] - The cautious outlook reflects uncertainties related to tariffs and a competitive environment in the PC client and datacenter markets [12] Impact of Tariffs - CFO David Zinsner noted that fears around tariffs led customers to stockpile Intel chips, boosting first-quarter sales, but the company expects a downturn in the second quarter as a result [3][5] - Chips manufactured in the U.S. face potential levies of 85% or higher in China, which is typically Intel's largest market [10] Strategic Changes - CEO Tan plans to streamline the company by reducing adjusted operating expenses to approximately $17 billion in 2025, down from $17.5 billion, and targeting $16 billion in 2026 [5] - The company is also reducing its gross capital expenditures target to $18 billion for 2025, down from $20 billion [9] - Tan's restructuring efforts will include layoffs and a focus on cutting internal bureaucracy to enhance product development efficiency [6][7][8] Market Position - Intel's strategy to become a contract manufacturer of chips has strained its finances due to significant investments in advanced manufacturing facilities [14] - China imports $10 billion worth of chips from the U.S. annually, with about $8 billion being central processing units (CPUs) assembled by Intel [11]