Intel's (INTC) first-quarter earnings for Q1 2025 reflect a company in transition, showing modest progress amid ongoing challenges. Revenue came in at $12.7 billion, flat year-over-year, but the bottom line widened, with a GAAP net loss of $(821) million, more than double the $(381) million loss in the same quarter last year. GAAP loss per share was $(0.19), while non-GAAP EPS declined to $0.13 from $0.18, underscoring margin pressure and continued investment needs.

Margins compressed notably, with GAAP gross margin falling to 36.9% from 41.0%, largely due to inventory charges tied to the Gaudi AI accelerator. Non-GAAP gross margin also slipped to 39.2%, reflecting a tough pricing environment and product mix shifts. Still, Intel generated $0.8 billion in operating cash flow, reversing a cash outflow position from the prior year thanks to working capital improvements.

Segment performance revealed contrasting trends. The Client Computing Group (CCG) reported $7.6 billion in revenue, down 8% YoY, as last year’s one-time customer incentives weren’t repeated and unit volumes declined. In contrast, the Data Center and AI (DCAI) unit posted an 8% revenue increase to $4.1 billion, fueled by strong hyperscale demand and a 16% rise in server volumes, though pricing headwinds resulted in a 10% decline in ASPs.

Intel Foundry posted a 7% increase in revenue to $4.7 billion, driven by internal demand and growth in advanced node volumes. However, it continued to generate significant losses, with a $(2.3) billion operating loss and a (50)% operating loss margin, though both slightly improved from a year ago.

Notably, Intel’s “All Other” segment, including Mobileye and Altera, saw revenue surge 47% to $943 million, while swinging to a $103 million operating profit from a prior loss of $(170) million, thanks to stabilizing inventory levels.

Operating expenses were a bright spot. R&D and MG&A dropped 19% YoY to $4.8 billion, reflecting the company’s cost-cutting efforts under the 2024 Restructuring Plan. Looking ahead, Intel reaffirmed plans to hold non-GAAP operating expenses to $17 billion in 2025, and $16 billion in 2026, showing commitment to operational discipline. Capital expenditure guidance was also revised downward, with gross capex now targeted at $18 billion, a $2 billion reduction, while net capex is projected between $8–11 billion, reflecting increased external funding support.

Management remained cautiously optimistic. CEO Lip-Bu Tan characterized the quarter as “a step in the right direction,” but emphasized the long road ahead to reclaim market leadership. CFO David Zinsner pointed to continued industry volatility and stressed a disciplined approach to balancing investment with cost control.

On the product front, Intel launched its Core™ Ultra 200 and Xeon® 6 processors, with third-party benchmarks showing up to 1.9x AI performance gains. Its next-gen 18A process node remains on track for a second-half 2025 ramp, supporting the upcoming Panther Lake platform.

Looking ahead to Q2 2025, Intel guided for revenue between $11.2–12.4 billion, with GAAP EPS of $(0.32) and non-GAAP EPS of $0.00. GAAP gross margin is expected to dip to 34.3%, with a non-GAAP margin of 36.5%, indicating continued profitability pressure.

In summary, Intel is executing on a multi-pronged turnaround strategy—restructuring operations, optimizing costs, and investing in foundational technologies. While short-term challenges remain, especially around profitability and competitive positioning, the company is focused on long-term resilience through disciplined execution and innovation.