Political Landscape Shows Struggles, Poor Performance Indicators Suggest Exit is advisable
In the tech industry, the second quarter of 2025 has seen significant developments for Intel, the world's largest chipmaker. Let's delve into some key highlights and future prospects.
In July, Intel sold 57.5 million shares of Mobileye, bringing in an additional $922 million. This move comes as the company continues to navigate its financial landscape.
The US government is considering a potential capital injection into Intel, using funds from the CHIPS Act. Intel has been promised up to $8.5 billion since March 2024, with the possibility of up to $11 billion in federal loans, including a 25% ITC tax credit.
However, Intel's financial performance in Q2'25 was less than stellar. The company reported sales of $12.9 billion, but the earnings per share (EPS) stood at a loss of $-0.67. The management did not improve the outlook for Q3'25, with EPS expected to be $-0.24 and sales anticipated to be between $12.6-13.6 billion.
Intel's gross margin fell to 27.5% in Q2'25 due to one-time accounting interventions and accelerated depreciation and impairments. In contrast, Taiwan Semiconductor Manufacturing Company (TSM) delivered a gross margin of 58.6% and an operating margin of 49.6% on revenues of $30 billion per quarter.
Advanced Micro Devices (AMD), Intel's main competitor, reported a record $7.7 billion in sales in Q2'25, with a gross margin of 40%. AMD has been cutting into Intel's server market share for a long time, and recent quarters have seen visible gains in the desktop segment, slowly eroding Intel's product momentum.
Intel's current financial struggles have led to a slowdown in construction in Ohio, and the cancellation of plans in Germany and Poland. The company's target CapEx for 2025 is set at $18 billion, but the company has started to slow down greenfields, which might result in a relatively lower figure at the end of the year.
Despite these challenges, Intel's share price has been growing for several days, adding almost 9% intraday and double-digit growth in a week. The company also generated $2.1 billion from operating activities in the last quarter, strengthening its cash position outside the core business.
It's important to note that the U.S. government, the current owner of approximately 9.9% of Intel's shares, acquired them as part of a deal involving subsidies under the CHIPS and Science Act. However, these shares come without voting rights, so the government cannot directly influence Intel's management decisions.
In conclusion, Intel's Q2'25 results show a challenging financial landscape, but the company continues to make strategic moves to navigate these difficulties. The future prospects for Intel remain uncertain, but the potential capital injection from the US government and the growth in its share price offer some hope for the company's future.
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