Intel’s Quarterly Results: A Test for CEO Lip-Bu Tan’s Turnaround Strategy

Intel’s upcoming quarterly results will provide crucial insight into new CEO Lip-Bu Tan’s strategy to revive the struggling American chipmaker. Investors are keenly anticipating early indicators that he can rectify the strategic missteps that have plagued the company for years.

Fourth Consecutive Revenue Drop

The company is poised to report its fourth consecutive quarterly revenue decline this Thursday. Once a dominant player in global chipmaking, Intel has seen its market share waning against rivals like AMD in the personal computer and data center sectors, while Nvidia has surged ahead in the rapidly growing artificial intelligence domain.

Leadership Changes Under Tan

In March, Tan took over as CEO after resigning from Intel’s board in August 2024 amid differing opinions on the company’s direction. “The most important thing for Intel now is Lip-Bu Tan’s playbook,” stated Hendi Susanto, portfolio manager at Gabelli Funds. Investors are eager to see how Tan can instill confidence and demonstrate that a turnaround is possible.

Streamlining Operations

According to reports by Reuters, Tan has already started to flatten Intel’s leadership structure, with key chip divisions now reporting directly to him. This operational streamlining is viewed as a critical component of his strategy to refocus Intel’s business and allocate resources toward essential investment in chip manufacturing.

Challenges in the AI Market

Intel’s strategy regarding artificial intelligence also remains uncertain. The company has shelved its Falcon Shores graphics chips for internal testing, lacking a competitive flagship product in the lucrative AI market. Recently, networking head Sachin Katti was appointed as chief technology officer and AI lead, possibly signaling a significant shift in focus.

Geopolitical Pressures

Tan’s challenges are compounded by rising tensions in the U.S.-China trade relationship, with escalating tariff threats casting a shadow over the semiconductor industry. Although semiconductor items have avoided U.S. tariffs so far, President Donald Trump has indicated that industry-specific tariffs may be forthcoming.

Impact of Potential Tariffs

In response, China has issued warnings that U.S.-made chips could face tariffs upwards of 85%, according to a notice from the state-backed China Semiconductor Industry Association. This geopolitical landscape poses significant risks for Intel, as China represented the company’s largest market in 2024, accounting for nearly one-third of its total revenue.

Anticipated Revenue Changes

Despite the looming tariff threats, analysts anticipate that Intel may see advantages in the first quarter from manufacturers accelerating PC shipments in preparation for potential tariffs. Data from Canalys suggested a 9.4% increase in global PC shipments during this period.

Utilizing Global Factories

Strategically routing production through Intel’s facilities outside the U.S., particularly its fabrication plant in Ireland, could mitigate some tariff pressures, according to Lou Miscioscia, an analyst at Daiwa. This facility is responsible for a substantial segment of Intel’s chip output.

Manufacturing Strategy Distinction

Intel stands out among major chipmakers, as it both designs and manufactures its processors, unlike competitors who outsource production to Taiwan’s TSMC. Nevertheless, Intel continues to rely on TSMC for some advanced chips, which could shield portions of its business from Chinese tariffs.

Focus on Core Products

Tan has emphasized that he is equally focused on both Intel’s chip products and its contract manufacturing unit—an area that was central to his predecessor Pat Gelsinger’s strategy. Unfortunately, the fabrication segment has incurred billions in costs with minimal returns to date.

Expected Financial Outlook

The outlook for Intel’s PC division indicates an 11% drop in revenue to $6.73 billion for the March quarter. Additionally, the data center business is projected to experience a 1% decline, marking its twelfth consecutive quarterly fall.

Overall Revenue Projections

Overall, Intel’s revenue is expected to decrease by 3.4% during the quarter, according to data compiled by LSEG. The projected loss is anticipated to widen to nearly $945 million, up from $381 million in the previous year.

Conclusion

As Intel prepares to disclose its quarterly results, all eyes will be on CEO Lip-Bu Tan and his strategies to navigate the challenges ahead. Whether he can effectively address years of strategic missteps and bolster investor confidence remains to be seen.