Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings

Key Points

• Intel's new leadership is taking decisive action, including workforce adjustments designed to enhance operational efficiency and foster engineering excellence.
• Strategic divestments, like the Altera sale, are freeing up capital and allowing management to concentrate resources on core business priorities, such as foundry services.
• The upcoming earnings report provides a key opportunity for Intel's leadership to communicate its strategic vision and path towards future stabilization and growth.

Intel Corporation NASDAQ: INTC is undertaking one of the most significant operational overhauls in its storied history, signaling the urgency of its turnaround efforts under new leadership.

Reports surfaced on Apr. 23, 2025, indicating that the semiconductor giant plans sweeping layoffs expected to impact more than 20 percent of its global workforce. Based on recent headcount figures, this drastic measure, potentially affecting over 21,000 employees, represents a defining early move by CEO Lip-Bu Tan, who assumed leadership just last month, March 2025.

The timing of this announcement is critical, coming just one day before Intel is scheduled to release its highly anticipated first-quarter 2025 financial results today, Apr. 24th. This mixture of major restructuring news and a pivotal earnings report places intense scrutiny on the company as it navigates profound financial and competitive challenges, forcing investors to look for clear signals of stabilization and strategic direction.

The Crucible: Layoffs, Divestments, and an Engineering Refocus

CEO Lip-Bu Tan's strategy to reshape Intel includes a significant layoff plan as its most recently revealed feature. The publicly declared objectives go beyond cost reduction, focusing on streamlining internal bureaucracy and fostering a more agile, engineering-centric company culture.

This push for efficiency follows a previous round of job cuts in 2024, which reduced the workforce by roughly 15,000 positions to 108,900 by the end of December 2024, down from 124,800 the prior year. These new reductions indicate a stronger commitment to cost savings and restructuring, consistent with earlier aims to substantially lower expenses by 2025.

This workforce reorganization aligns with other recent strategic actions intended to sharpen Intel's focus. In early April, the company announced a deal to sell a 51% controlling interest in its Altera programmable chip (FPGA) division to Silver Lake, a private equity firm. Although this sale involves a considerable loss compared to the initial purchase price, it releases capital and management resources, enabling greater focus on core CPU operations and the crucial Intel Foundry Services (IFS) initiative.

Intel has also modified its product roadmap, discontinuing the high-performance Falcon Shores chip project to concentrate more on data center solutions and AI inference capabilities through products such as its Xeon 6 processors and the future Jaguar Shores GPUs. 

Market Gauges Intel's Moves

Following reports of layoffs, Intel’s stock experienced a 5% increase on Apr. 23rd, closing at $20.57. However, this positive movement needs to be contextualized by the stock's 40% decline over the preceding year, placing it closer to its 52-week low ($17.67) than its high ($37.16) and resulting in a market capitalization of approximately $89.7 billion. 

While valuation metrics such as a price-to-book ratio (P/B) of around 0.85 and a price-to-sales ratio (P/S) of about 1.69 seem moderate, the company's current lack of profitability, as shown by its negative price-to-earnings (P/E), creates uncertainty.

Intel’s analyst community generally holds a cautious outlook, with a consensus Reduce rating. Of 32 analysts, only one recommends a Buy, 27 advise Hold, and four suggest Sell, indicating a recent rise in bearish sentiment. The average 12-month price target has decreased to $23.43, suggesting potential upside but also reflecting diminished expectations and the substantial execution challenges associated with Intel's turnaround strategy, particularly its costly and currently unprofitable foundry operations.

Further complicating matters are ongoing geopolitical headwinds stemming from US-China trade tensions, tariffs, and AI chip export limitations. These factors are relevant given Intel's substantial revenue exposure (approximately 27%) to the Chinese market, although recent diplomatic signals suggest a possible easing of these tensions.

The Moment of Truth: Q1 Earnings Call Takes Center Stage

Intel's first-quarter 2025 earnings report, due after the market closes on Apr. 24th, is highly significant when contextualized with ongoing restructuring and strategic changes. The conference call marks CEO Lip-Bu Tan's first major address to investors since the layoff announcement, offering a chance to detail his vision and immediate priorities.

Investors will examine several key areas closely. First, headline Q1 financial results, specifically revenue and earnings per share, will be compared against modest analyst expectations. While Intel has occasionally exceeded estimates, the overall trend is weak.

More importantly, the forward-looking guidance for the second quarter and potentially the rest of 2025 will be critical. Any indication of stabilization or positive signs in key markets would be encouraging, with near-term growth expected if the report meets expectations and the guidance is acceptable. 

Furthermore, the market anticipates comprehensive comments on the planned layoffs, including projected timelines, cost savings, and potential restructuring expenses. Progress updates on Intel Foundry Services, particularly concerning customer agreements and the advancement of technologies like Intel 18A, will be essential.

Finally, CEO Tan's explanation of Intel's strategy for navigating the competitive environment and managing current geopolitical risks will significantly shape near-term market sentiment towards the stock.

Execution Remains Key for Intel's Revival

Intel faces significant challenges requiring drastic action to reverse declining market share and financial performance. Recent massive layoffs, while demonstrating the CEO’s commitment to change, are insufficient for a successful turnaround.

The company's long-term prospects and stock recovery hinge on flawless execution across several key areas: achieving its technology roadmap (including Intel 18A), regaining competitiveness in CPU and AI markets against strong rivals, transforming its loss-making foundry business into a profitable venture, and effectively managing global geopolitical complexities.

Although the upcoming earnings report will offer important insights, Intel's path back to sustained growth and profitability will be lengthy and demanding, requiring near-perfect execution in the coming years.