Intel Corporation (INTC) Q1 2025 Earnings Dissected

Intel (INTC) released Q1 2025 earnings on the 24th of April 2025.

Analyzing Intel Finances – Financial summary

The company presented a net loss of 887 M$ for the three months ended 29 March 2025, from which 596 M$ are attributable to Intel.

The balance sheet of the company is stable, with a slight increase in the cash position (from 8,249 M$ to 8,947 M$) and a decrease in current liabilities (from 35,666 M$ to 32,174 M$) and long-term debt (from 46,282 M$ to 44,911 M$).

The current GAAP gross margin (~37%) seems reasonable, but it has been declining since 2021 and now it is insufficient for overall company profitability. The infrastructure is simply too expensive and Intel fabs probably have been underutilized.

In terms of segment performance, Data Center is strong, Client Computing is stable and producing profit, but Intel Foundry continues with a catastrophic operating margin of -49%! Altera and Mobileye have positive contributions for the overall Intel revenue.

As time goes by, Intel Foundry performance has not been improving. It is not clear whether the Fab facilities are underutilized due to lack of demand, issues of communication and interoperability with customers, or excessive fixed costs in these facilities. In any case, the new CEO must solve this blood draining segment.

Other Intel developments

Other recent developments include the divestitude of:

1) NAND memory technology and manufacturing business (the NAND OpCo Business) was sold to SK hynix Inc. (SK hynix). The first phase of the transaction was completed on December 29, 2021, while the second phase of the transaction was execured on March 27, 2025, the outstanding receivable was collected, and proceeds of $1.9 billion were recorded within cash and cash equivalents, net of certain adjustments.

2) On April 14, 2025, a transaction agreement was signed with SLP VII Gryphon Aggregator, L.P., an affiliate of Silver Lake Partners (SLP), to sell 51% of all issued and outstanding common stock of Altera, a wholly owned subsidiary of Intel. The transaction is expected to close in the second half of 2025, subject to regulatory approvals and other customary closing conditions, and is expected to result in the receipt of net cash proceeds of $4.4 billion, after adjusting for certain amounts. Intel will retain a 49% minority investment in the business. Altera will start to operate independently from Intel, on a standalone basis, but Intel will provide semiconductor wafer manufacturing services to Altera.

During the earnings call, Lip-Bu Tan showed his passion for the company and presented some general directions to move the company forward: Improving innovation by making the organization more horizontal, increasing focus on the client, streamlining internal processes, cost cutting, reduction of the size of the teams (a previous metric of the company was the number of employees in each division!), and increasing the mandatory number of in-person workdays at the office.

outlook for INTEL

In the day after the earnings, the stock tanked by 6.7%, and with good reason. The outlook for full year 2025 is an earnings per share of 0$, and the plans to turn the company into profitable territory still look a bit shady and vague. One way or another, INTC can return to profitability, but due to the dimension of the company and complexity of clean-room processes and workflows, the Intel Fab segment will not turn profitable overnight. Rumors of partnerships with TSMC and other players are in the air…but nothing is official yet.

References:

FORM 10-Q – QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2025 (https://www.intc.com/filings-reports/all-sec-filings/content/0000050863-25-000074/0000050863-25-000074.pdf)

Earnings presentation (https://d1io3yog0oux5.cloudfront.net/_ad2e4b54358dec62cb0dc22fbf2bc96e/intel/db/887/9128/earnings_presentation/Q1+2025+Earnings+Deck+INTC.com.pdf)

Earnings webcast (https://edge.media-server.com/mmc/p/ot7cpdai/)

Press release (https://www.intc.com/news-events/press-releases/detail/1738/lip-bu-tan-our-path-forward)

Disclosure: This report is for informative purposes only. The original sources (SEC filings) should be verified. At the date of writing, I’m an Intel stockholder.