Intel stock rises on Q2 revenue beat, plans to cut 15% of workforce

Intel reported mixed Q2 results, beating revenue expectations with $12.8 billion against an anticipated $11.8 billion, but posting an adjusted loss per share of $0.10 due to $1 billion in impairment and one-time charges. Despite the EPS miss, the chipmaker provided an upbeat Q3 revenue forecast of $12.6-$13.6 billion, while also announcing a 15% headcount reduction and slowing construction on key projects. Intel's stock initially rose over 2% post-earnings, as its Products business outperformed expectations, though its Foundry segment continues to face challenges amid intense competition and speculation regarding potential write-downs on its 18A technology.

Analysis

Intel's second-quarter results present a complex narrative, defined by a significant revenue beat but a notable earnings miss driven by substantial one-time charges. The company reported revenue of $12.8 billion, comfortably exceeding the $11.8 billion consensus, powered by its core Products business which brought in $11.8 billion versus $10.9 billion expected. However, this top-line strength was negated by an adjusted loss per share of $0.10, missing forecasts for a $0.01 profit, a result directly attributable to $1 billion in impairment and one-time costs from asset write-downs. In response, management is executing an aggressive restructuring plan, including a 15% headcount reduction and curtailing capital-intensive projects in Ohio, Germany, and Poland. Despite the bottom-line miss, the company issued an upbeat Q3 revenue forecast of $12.6 billion to $13.6 billion, with the midpoint surpassing the $12.6 billion analyst estimate, which spurred an initial 2% rise in the stock. A significant long-term risk looms over its nascent Foundry business; while it met revenue expectations at $4.4 billion, reports that the new CEO may prioritize the next-generation 14A technology over the current 18A process for external clients introduce the possibility of a massive write-down, creating strategic ambiguity as Intel contends with fierce competition from AMD and Qualcomm.

Key Decisions for Investors

• Investors should weigh the positive near-term catalyst from strong Q3 revenue guidance against the significant long-term uncertainty surrounding the Foundry strategy and the potential for a major write-down on its 18A technology.
• It is critical to monitor for any official clarification from management regarding the future of the 18A versus 14A process nodes, as a pivot could fundamentally alter the financial model and trigger asset impairments.
• The aggressive cost-cutting, including a 15% headcount reduction and capex slowdown, should be tracked for its potential to improve operating margins, but also assessed for any risk it poses to long-term innovation and competitiveness against rivals like AMD and Qualcomm.
• Given that Intel's stock remains down 28% over the last 12 months despite a recent upswing, traders may see a tactical opportunity in the strong guidance, while long-term investors should remain cautious pending clarity on the Foundry's strategic direction and competitive execution.