INTEL CORP Q1 FY2025 earnings call

Lip Bu Tan joined Intel five weeks ago and emphasized the need to transform culture and operations, including flattening the leadership team, simplifying business processes, and reducing layers. They aim to reduce OpEx to $17 billion in 2025 and $16 billion in 2026, and CapEx to $18 billion in 2025. Focus on product innovation, especially for AI workloads, refining AI strategy, building trust with foundry customers, and strengthening the balance sheet. David Zinsner discussed Q1 results, noting revenue was above guidance, gross margin was 39.2%, and provided Q2 guidance with a wider revenue range due to macroeconomic uncertainty.

Intel products revenue was $11.8 billion, down 10% sequentially. CCG revenue was down 13% quarter over quarter, below typical seasonality and in line with expectations with higher-than-expected volumes offset by product mix and competitive pressure. DCAI revenue was down 5% sequentially and above expectations driven by hyperscaler demand for host CPUs for AI servers and storage compute. Intel Foundry delivered revenue of $4.7 billion, up 8% sequentially on pull-ins of Intel seven wafers and increased advanced packaging services. All other revenue came in at $943 million, down 15% sequentially. Intel products operating profit was $2.9 billion, 25% of revenue, and down $632 million quarter over quarter on lower revenue, partially offset by reduced operating expenses. Intel Foundry operating loss in Q1 was $2.3 billion, roughly flat quarter over quarter and in line with expectations.

Q2 revenue guidance is $11.2 to $12.4 billion, down 2% to 12% sequentially. Expect DCAI to decline faster than CCG, Intel Foundry revenue down QoQ due to pull-ins and capacity constraints, and all other revenue roughly flat. 2025 OpEx target is $17 billion, 2026 OpEx target is $16 billion. 2025 gross CapEx target is $18 billion. NCI expected to be approximately $500 million on a GAAP basis in 2025, with a range of $1.3 to $15 billion in 2026.

Macro-economic uncertainty, shifting trade policies, persistent inflation, increased regulatory risk, potential tariffs impacting TAM contraction, and uncertainty regarding the timing of US government obligations in the CHIPS agreement.

Q: Ross Seymore from Deutsche Bank asked about balancing internal product roadmap and foundry.

A: Lip Bu Tan discussed flattening organization and focusing on killing products.

Q: Timothy Arcuri from UBS asked about Q1 gross margin clean number and Q2 guidance.

A: David Zinsner explained Q1 margin benefits from top-line beat and mix, and Q2 guidance considering tariffs.

Q: Joseph Moore from Morgan Stanley asked about Panther Lake and Clearwater Forest.

A: Lip Bu Tan and Michelle Johnston Holthaus discussed Panther Lake ramp and Clearwater Forest prioritization.

Q: C.J. Muse from Cantor Fitzgerald asked about AI strategy and OpEx savings.

A: Lip Bu Tan talked about AI strategy and David Zinsner discussed OpEx targets.

Q: Vijay Rakesh from Mizuho asked about server market and CapEx.

A: Michelle Johnston Holthaus and David Zinsner discussed server market outlook and CapEx targets.

Q: Stacy Rasgon from Bernstein Research asked about seven nanometer constraint and Panther Lake launch.

A: Michelle Johnston Holthaus discussed macroeconomic impact and Panther Lake launch.

Q: Srini Pajjuri from Raymond James asked about Panther Lake ramp and Nova Lake mix.

A: Michelle Johnston Holthaus and David Zinsner discussed Panther Lake ramp and Nova Lake mix.

Q: Thomas O'Malley from Barclays asked about client dynamics and data center strategy.

A: David Zinsner and Michelle Johnston Holthaus discussed client dynamics and data center strategy.

Q: Vivek Arya from Bank of America Securities asked about Intel's turnaround and IDM structure.

A: Lip Bu Tan discussed turnaround timeline and IDM strategy.

Q: Aaron Rakers from Wells Fargo asked about Altera divestiture and data center AI strategy.

A: David Zinsner clarified Altera divestiture and Michelle Johnston Holthaus discussed data center AI strategy.