Intel (INTC, Financial) surpassed first-quarter 2025 EPS and revenue expectations due to better-than-expected performance in its data center business and ongoing cost-cutting measures. However, a weak Q2 outlook indicates that Intel's turnaround is still underway. Under CEO Lip-Bu Tan, the company is taking steps to accelerate this turnaround by restructuring to eliminate management layers, reduce bureaucracy, and cut costs.

Intel has revised its FY25 operating expense target to $17.0 billion, down from $17.5 billion, and forecasts $16.0 billion for FY26. The company is also aiming to preserve cash and enhance free cash flow by slowing fab construction and delaying non-essential investments, reducing its FY25 capex guidance to $18.0 billion from $20.0 billion.

• In the Data Center & AI (DCAI) segment, Intel faces challenges due to market share losses to NVIDIA (NVDA, Financial), Arm Holdings (ARM, Financial), and Advanced Micro Devices (AMD, Financial). Despite a 3% drop last quarter, DCAI revenue grew 8% in Q1 to $4.1 billion, driven by demand for Xeon CPUs and Gaudi accelerators. However, this growth was partly due to customer purchases ahead of potential tariffs, casting doubt on its sustainability.
• Intel delayed the production of its Clearwater Forest chip, its first data center CPU on the 18A process, to 1H26 from the original 3Q25 plan. This delay is significant, as successful mass production could validate Intel's new process technology and attract new foundry customers. Failure to gain traction could heighten concerns about Intel's technology leadership.
• In the Client Computing Group (CCG), Intel plans to launch Panther Lake in 2H25, targeting PCs and laptops with the 18A process. Panther Lake aims to drive AI PC adoption, helping Intel regain momentum in the client market. CCG revenue fell 8% to $7.6 billion due to an unfavorable product mix and increased competition from AMD, ARM, and Qualcomm (QCOM, Financial) with its Snapdragon X series processors.

While Intel's Q1 results exceeded expectations due to DCAI and Foundry performance, the company still faces profitability and competitive challenges. Restructuring and cost-cutting are key to its 2025 strategy, with Panther Lake and Clearwater Forest launches as critical product catalysts. Success in advanced process nodes and Foundry customer acquisitions will be crucial for Intel's long-term turnaround.