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On Thursday, domestic chipmaker Intel (NASDAQ:INTC) delivered its Q2 2025 earnings report. Despite surpassing the LSEG revenue consensus of $11.92 billion at $12.86 billion, Intel stock faltered, down 11% over the week.
Now priced at $20.71 per share, INTC shares are slightly under the 52-week average of $21.78 and significantly below the yearly peak of $27.39 in mid-February. The reason for the loss of shareholder confidence lies in the loss of profitability. Against the estimated earnings per share (EPS) of $0.01, Intel reported an earnings loss of $0.10 (non-GAAP). In figures, Intel incurred a net income (GAAP) loss of $2.9 billion against the $1.6 billion loss in the year-ago quarter, marking an 81% year-over-year decline in profitability.
However, there is some silver lining that investors should take into account.
Intel’s Restructuring Costs Piling Up
Despite heavy competition from AMD (NASDAQ:AMD) on the CPU front with its increasingly popular lineup of Ryzen CPUs, Intel managed to keep its revenue relatively flat. At $12.9 billion, Intel’s revenue grew by just 0.8% year-over-year. Likewise, the non-GAAP EPS miss is drastically affected by a restructuring charge.
Without it, Intel’s EPS would have been $0.10, beating the estimate of $0.01. Compared to a GAAP EPS of -$0.38 in Q2 2024, this quarter delivered a 76% drop at -$0.67. For those confused between GAAP and non-GAAP figures, the latter excludes non-recurring costs, giving a better overview of core business.
After gaining a new CEO Lip-Bu Tan in March, it was to be expected that exiting the financial slump itself would incur restructuring costs. Tan made it clear Intel’s focus should be on core business, the rollout of Intel 18A (1.8nm) chips, and the reduction of the managerial overhead.
To that end, the company is close to completing its workforce reduction by ~15% announced last quarter. The restructuring charge excluded from non-GAAP figures was $1.9 billion, lowering GAAP EPS by $0.45 per share.
Much like the revenue, Intel’s operating cash flow remained flat from the year-ago-quarter, at $2.1 billion. After selling Mobileye shares worth around $922 million, Intel was left with $9.64 billion in cash balance, which is up 16.7% from the year-ago quarter. Likewise, Intel reduced its current total liabilities by nearly 2%, now at $34.96 billion.
Intel’s Road Ahead
The semiconductor business is one of the most complex endeavors. Not only does it require a high talent pool, it relies on rare earth elements (REEs) and further ASML (AS:ASML) advances in its total monopoly on extreme ultraviolet (EUV) lithography machines.
This is why the federal government views Intel as a strategic asset of national security importance. For the same reason, USG heavily influences Dutch ASML to leverage against China. Combined with R&D costs involved to keep up with competitors like AMD, Nvidia (NASDAQ:NVDA), Samsung (KS:005930) and TSMC, Intel’s gross margin has been shrinking since early 2020.
In Q2, cost of goods sold (COGS) incurred another gross margin shrinkage for Intel, having dropped from 35.4% in Q2 2024 to 27.5% (GAAP). However, with the 18A wafer production starting on schedule in Arizona, the company expects gross margin to improve to 34.1% in Q3.
Intel’s revenue guidance for Q3 is similarly optimistic, at $12.6 billion – $13.6 billion range, with an EPS of -$0.24 vs -$0.38 GAAP EPS in Q2. Without further dramatic restructuring costs, it is then likely that the current INTC stock slump represents an opportunity.
Panther Lake processors in late 2025 and early 2026 should begin Intel’s resurgence arc after many stability and reliability issues plaguing Raptor Lake series. When it comes to the GPU market, it appears that Intel has been too long out of the game, making it extremely difficult to create a dent against Nvidia and AMD.
According to JPR data, Intel’s 2nd-gen Battlemage GPUs (B570 and B580) make effectively zero share against Nvidia’s dominance of 92% and AMD’s 8% in Q1 2025. The likely core problem is that the GPU market has been laden too much with multi-frame generation standards such as Nvidia’s DLSS and AMD’s FSR.
Only recently did AMD manage to level up with Nvidia with FSR 4 implementation. Therefore, accounting for Intel’s XeSS super-sampling implementation would take a longstanding effort for discrete GPU customers to jump on the blue train.
Intel’s Price Target (NYSE:TGT)
Given the non-recurring restructuring impact on Intel’s earnings, Q3 is likely to see superior performance which should reflect on INTC stock. Shareholders should also be aware that Intel remains one of the most important strategic assets in an ongoing AI race against China.
Against the current price of $20.71, the average INTC price target is $21.97 per share, according to WSJ forecasting. The majority of analysts recommend holding, 38, while 4 are bearish and 2 are bullish. The ceiling INTC price target is $28.30, with a bottom outlook of $14 per share.
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