Investing.com -- Intel Corporation (NASDAQ:INTC) issued a cautious Q2 forecast on Thursday, citing a “fluid” macro environment and growing trade policy uncertainty, while outlining aggressive cost-cutting and management restructuring plans. The company expects revenue for the second quarter to fall between $11.2 billion and $12.4 billion, a year-over-year decline of up to 12%, as it braces for potential economic fallout from tariffs and inflation.

“We believe Q1 revenue benefited from customer purchasing behavior in anticipation of potential tariffs,” CFO David Zinsner said during the company’s earnings call. "This year could be choppy depending on what ultimately is settled across the U.S. and abroad."

Q1 results came in better than expected, with revenue of $12.7 billion and non-GAAP earnings of $0.13 per share, compared with breakeven guidance. But Intel warned that the early strength was likely front-loaded and not indicative of the rest of the year. Management expects the June quarter to soften as tariffs begin to weigh on demand and supply chains.

In response to slowing growth and volatile market conditions, Intel is flattening its leadership structure and cutting costs. “Organizational complexity and bureaucracies have been suffocating the innovation,” said CEO Lip-Bu Tan. “As a first step, I have flattened the structure of my leadership team. All critical product, manufacturing, and G&A functions… now report directly to me.”

The company has lowered its 2025 operating expense target to $17 billion and set a goal of $16 billion for 2026. While headcount reductions are likely, Zinsner said the exact impact isn’t finalized. “We have not yet identified what that means from a headcount perspective. There are obviously other categories of spend… and those will all be scrutinized,” he said.

Intel also trimmed its 2025 capital expenditure target by $2 billion, from $20 billion to $18 billion, reflecting a drive to “leverage our assets under construction” and prioritize existing capacity over new projects. “We are taking on a more aggressive approach to driving better return on what we’ve spent already,” Zinsner said, citing $50 billion in assets currently under construction.

The Q2 outlook implies softness across Intel’s core businesses, particularly in data center and foundry operations. Gross margin is projected to fall to 36.5%, down from 39.2% in Q1, hurt by product mix, outsourced manufacturing volumes, and start-up costs surrounding the 18A node ramp.

On the product side, Intel reaffirmed its intentions to launch its first Panther Lake SKU by year-end 2025, manufactured on 18A. “Panther Lake product looks quite competitive… we expect strong uptake,” said Intel President Michelle Johnston Holthaus, pointing to early commercial demand for AI PC upgrades.

Tan reiterated the company’s longer-term focus on product competitiveness, customer trust, and end-to-end AI platform development. He acknowledged that success will “take time” and involve a shift in culture, design philosophy, and client alignment. “There are no quick fixes,” he said.

Despite near-term headwinds, Intel emphasized that its transformation is underway. “I will not be satisfied until we regain the trust of our customers,” said Tan. “By eliminating inefficiencies and transforming how we do business, I strongly believe we can reduce our costs while securing our future.”

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