Intel's Strategic Shift: Panther Lake, Nova Lake, and the Return of Hyper-Threading Amid Restructuring

Intel promises sweeping changes to combat stagnation with new foundry strategy, AI focus, and the return of Hyper-Threading -- but losses threaten to curtail ambition

Intel's Q2 revenue flat year-over-year, but losses deepen, and outlook remains bleak Intel on Thursday disclosed its financial results for the second quarter of 2025 and made several announcements about its future. The company posted flat year-over-year revenue of $12.9 billion; however, losses deepened to $2.9 billion as gross margin declined further amid flat operating expenses. This is mostly due to charges associated with the company's restructuring. During the conference call, Intel also revealed its new strategies for AI, foundry, and x86 products. Intel CEO Lip-Bu Tan also made sweeping announcements regarding Intel's business operations. During the conference call with analysts and investors, Tan revealed a lot about the company's future, including its plans to change strategies for AI, foundry, core x86 businesses, and even organization and culture. He also revealed that the transformation of the company involves cutting its workforce to 75,000 by the end of the year, which means that the company will have laid off over 30,000 people by the end of 2025. "Over the last three months, I have completed a systematic review of every organization and function reporting to the CEO," he said. "These reviews included detailed analysis of headcount, skillset, spending, site distribution, executive population, and restructuring plans. We have much work to do in building a clean and streamlined organization, which we have started. [...] Our goal is to reduce inefficiencies and redundancies and increase accountability at every level of the company. We need to right-size and scale back the company while ensuring that we are retaining our best internal talents and hiring the best external talents from industry and universities. During Q2, we completed the majority of the actions needed to achieve our year-end target of 75,000 employees. [...] These actions are necessary not just to reduce our operating expenses, but to make the company more agile, collaborative, and vibrant to simplify our business and improve our product and process execution." Tan emphasized a back-to-basics approach to Intel's x86 product strategy, aiming for architectural discipline, streamlined execution, and competitive positioning in both client and server markets. He indicated that the Panther Lake processor, built on the Intel 18A node, remains on track to launch by the end of 2025, with additional SKUs following in the first half of 2026. He expects Panther Lake to reinforce Intel's strong position in notebooks across consumer and enterprise. For server CPUs, Granite Rapids is ramping as planned and is performing well in AI host nodes and storage, but broader share gains in hyperscale workloads will require time and improvement in performance-per-watt, which essentially means that Intel is having a hard time competing with AMD's EPYC. At the same time, he acknowledged that Intel's CPUs are uncompetitive in high-end desktops. To improve the competitive positions of Intel's high-performance CPUs, Tan said Intel plans to re-enable simultaneous multithreading (SMT) to P-cores in client processors. Tan is also introducing a new policy that all major chips will require his personal review and approval of designs before tape-out, to ensure high margins and simplify the product line-up. "I have already begun this process," he said. Looking forward, the directive to Intel's silicon teams is to focus on clean, simple architectures with better cost structures, a more focused SKU line-up, and improved product margins. Tan outlined a major shift in Intel's foundry and CapEx strategy, moving away from massive investments in capacity that were common for Intel in recent years. He acknowledged that Intel's past approach -- building massive capacity far ahead of actual demand -- was 'unwise and excessive,' leading to a 'fragmented factory footprint' and underutilized fabs. Instead of expanding based on internal forecasts, Intel will tie capacity and capital spending strictly to volume commitments and milestone-based triggers, which promises to ensure that investment aligns with both customer needs and financial returns. "I do not subscribe to the belief that if you build it, they will come," said Tan. "Under my leadership, we will build what customers need, when they need it, and earn their trust through consistent execution." To reinforce this disciplined approach, Intel has cancelled (or halted?) its manufacturing projects in Germany and Poland, is consolidating its assembly and test operations in Costa Rica, and will slow construction pace in Ohio, though retain the flexibility to accelerate if needed. On the process technology front, Tan reaffirmed Intel's commitment to 18A, the node to be used for at least three generations of Intel's consumer and server products, including Panther Lake, Clearwater Forest, and Diamond Rapids. The company's chief financial officer, Dave Zinsner, acknowledged that Intel does not expect loads of foundry customers with 18A, yet the company still positions the production node for both Intel's products and external customers. The CEO of Intel also emphasized that Intel 14A will be the company's first foundry-first node, designed in collaboration with external customers and tailored to meet their specific performance and cost needs. However, Tan made it clear that future investments will be contingent on Intel's ability to secure external demand and deliver return on capital, rejecting the notion of building on expectations. As a result, if Intel does not find at least one major external customer for 14A, the company may abandon or slow down its development and cease investments in 14A-capable capacity, which will essentially mean that Intel will cease developing leading-edge process technology and will produce its most advanced products at external foundries. This marks a significant philosophical transformation of Intel and highlights that Tan is at least considering much deeper changes at Intel than initially thought. But, for now, Intel remains committed to developing 14A. "18A is important to us for the three generations of internal products, and then when we are ready, then we can go outside with more confidence to get a customer to support us," Tan said. "And then on the 14A, same as the A14 from TSMC, the timing is all in 2028 - 2029." Tan described Intel's previous approach to AI as fragmented and overly focused on traditional silicon and training workloads, lacking a cohesive system and software stack. Under his leadership, Intel will now shift toward a full-stack AI strategy that integrates hardware, system-level design, and software. The new focus will build on Intel's existing silicon assets -- x86 CPUs and Xe GPUs -- with the aim of building a more tightly integrated platform. The company will strengthen its investments in AI software to make its platform more competitive, yet Tan admits that this will take time. Strategically, Intel is concentrating its AI efforts on areas where it believes it can differentiate and disrupt, particularly in inference and agentic AI, rather than competing directly with Nvidia's AI accelerators, such as H100 or B200. From now on, Intel will develop AI products by learning more about upcoming AI workloads, then designing a software stack for such workloads, and only then developing hardware for such needs, eventually delivering a full-stack AI solution. For the first quarter of 2025, Intel earned $12.9 billion, up slightly from $12.8 billion in the same quarter a year ago. However, the company's losses for the quarter totalled $2.9 billion, up from $800 million in the previous quarter, and up from $1.6 billion in Q2 2024. The company's gross margin dropped to 27.5%, pressured by a product mix, severance payments to laid-off employees, an impairment charge, and accelerated depreciation ($797 million), related to manufacturing assets deemed no longer usable for operations. In Q2 2025, Intel spent approximately $3.7 billion on R&D (down from $4.2 billion in Q2 2024) and $1.1 billion on mergers and acquisitions (down from $1.3 billion in Q2 2024). As Intel continued investments in advanced nodes like Intel 18A, new product development, and trimming administrative costs through restructuring. The company also recorded $1.9 billion in restructuring and impairment charges, primarily related to severance and the write-down of underutilized fab tools. These expenses contributed significantly to Intel's quarterly operating loss, but are part of the company's effort to streamline operations and reduce long-term costs. "Our operating performance demonstrates the initial progress we are making to improve our execution and drive greater efficiency," said Tan. "We are laser-focused on strengthening our core product portfolio and our AI roadmap to better serve customers. We are also taking the actions needed to build a more financially disciplined foundry. It's going to take time, but we see clear opportunities to enhance our competitive position, improve our profitability and create long-term shareholder value." Intel's Client Computing Group (CCG) in Q2 2025 generated $7.9 billion in revenue, down from $8.1 billion in Q2 2024. Operating income dropped both sequentially and year-over-year to about $2.1 billion, due to lower volumes and incremental charges. Average selling prices (ASPs) remained stable, compared to the same quarter a year ago. In Q2 2025, Intel's Data Center and AI (DCAI) group delivered $3.9 billion in revenue, representing a 4% increase year-over-year. This growth was primarily driven by stronger server CPU volumes, which rose 13% compared to Q2 2024. This is a result of demand recovery across hyperscale and enterprise customers. Also, the operating margin (OM) of the business unit increased to 16.1%, up from 6.4% in the same quarter a year ago. However, ASPs in this segment declined by 8%, primarily due to competitive pricing pressures and a shift in product mix. Despite the pricing headwinds, operating income improved by $391 million year-over-year, aided by a $524 million drop in operating expenses due to workforce reduction and structural cost cuts. In Q2 2025, Intel Foundry's revenue totalled $4.42 billion in revenue (up 3% YoY), but remained deeply unprofitable with an operating loss of $3.17 billion, driven by 18A start-up costs, and $797 million in impairment and accelerated depreciation charges related to underutilized fab tools. The vast majority of foundry revenue came from Intel's internal use, with external customer sales flat, at just $22 million. Although the segment benefited from $185 million in cost savings tied to restructuring, it continues to be a drag on Intel's overall financials. Despite these setbacks, Intel expects its foundry business unit to reach breakeven by 2027. Typically, sales of CPUs and supporting components are up in the third quarter of the year, as PC makers begin to procure processors for the back-to-school season and start to prepare for the holiday season. However, this is seemingly not the case for Intel. For Q3 2025, Intel projects its revenue between $12.6 billion and $13.6 billion, which is down $200 million by the midpoint of the quarter. Nonetheless, because the company took most charges in Q2, its third-quarter gross margin is expected to be 36%. These financial results, in addition to the sweeping changes that Tan is making to Intel, paint a curious picture for Intel for the rest of 2025 and beyond. The company has been sailing through rocky waters for some time, and it appears that despite the changes that leadership is looking to make, the storm is yet to pass for Team Blue.

Intel's 'Panther Lake' CPUs remain on track amid massive layoffs

Intel's CEO calls out the lack of hyperthreading as a key mistake. Intel said Thursday that the company's next big CPU bet, Panther Lake, remains on track to begin shipping this year, and the supporting 18A manufacturing process has already entered production. However, Intel plans to end 2025 with just 75,000 employees as it continues reducing its workforce. Intel chief executive Lip-Bu Tan also characterized Intel's move away from hyperthreading, begun with its "Arrow Lake" chip, as a mistake. As Intel reported earnings for the second quarter of 2025, the company's message was that it continues to execute on a strategy to focus on customers and engineering. As part of that, Intel recorded $1.9 billion in restructuring charges, mostly to do with reorganizing manufacturing and assembly operations. "I know the past few months have not been easy," Intel chief executive Lip-Bu Tan wrote in a memo to employees. "We are making hard but necessary decisions to streamline the organization, drive greater efficiency and increase accountability at every level of the company." Tan's goals are to "right-size" the company's workforce and hold them to account, by both trimming headcount and thinning the ranks of middle management. Tan also said that the company is slowing the development of its Ohio chip fab -- which was funded in part by the CHIPS Act, signed during the Biden administration. Intel plans to consolidate its assembly and test operations in Costa Rica to larger sites in Vietnam and Malaysia, and not go forward with "projects" in Poland and Germany. Intel was rumored to possibly shutter operations in Israel, but that hasn't happened. Tan called Intel's factory strategy "needlessly fragmented" in a conference call with analysts. Tan, however, seems to be completely behind Intel's existing product roadmap, which is centered on Intel's next-generation Panther Lake chip and the supporting 18A process. He called the 18A process (and a related 18A-P process) "the foundation of at least the next three generations of Intel client and server products," Tan said, delivering meaningful wafer volumes into the next decade. "Panther Lake is our top priority as it will reinforce our strength in notebooks across consumer and enterprise," Tan told employees. "We also must drive continued progress on Nova Lake to close gaps in the high-end desktop space." The first Panther Lake processor remains on track to begin shipping later this year, with additional products coming in the first half of 2026, Intel said. Tan said that he will sign off on every new major product before it tapes out. Tan also said in an analyst call that he was not a believer in "if you build it, they will come." Instead, Intel will build what customers want, when they need it, he said. Interestingly, Tan also criticized Intel's decision to eliminate hyperthreading, also known as simultaneous hyperthreading (SMT). Though he addressed this as an issue in the data center, it will be interesting to see whether Intel makes a similar decision to return hyperthreading to its desktop and client chips, as well. "Moving away from SMT put us at a competitive disadvantage," Tan said. "Bringing it back will help us close performance gaps." Finally, Intel will move away from a strictly silicon-based approach to AI. "We will focus our AI efforts on developing a cohesive silicon, system, and software stack strategy," Tan said. "We have a lot to fix to move the company forward, Tan said. "And I'm determined to drive the changes necessary to improve our performance." Intel lost $2.9 billion for the second quarter, under the GAAP method, recording flat revenue of $12.9 billion. Intel's outlook, however, was better than expected: $12.6 billion to $13.6 billion, which was more than what Wall Street expected. Intel's Client Computing Group revenues fell 3 percent versus the same quarter in 2024, down to $7.9 billion.

Intel Confirms Nova Lake To Close The High-End Desktop CPU Gap With AMD In Late 2026, Bringing SMT Back To P-Cores With "Coral Rapids" On Servers By 2028-2029, Highlights Need To Consolidate On Xe GPUs, & 55% Server Share

Intel's CEO, Lip-Bu Tan, made some interesting comments after the recent earnings call, regarding upcoming Nova Lake CPUs, Coral Rapids server CPUs with SMT-enabled P-Cores, and a word on its GPU strategy. Intel Changing Its Execution Plans: SMT Coming Back To P-Cores With Coral Rapids Server CPUs, Nova Lake For Consumers Later Next Year As of a few hours ago, Intel has planned to lay off an additional 30% of its workforce, bringing the headcount down to 75,000 employees, they have said to drop out of the cutting-edge chip race (18A/14A process nodes) if they don't see major interests from external customers, and well, their financials are in dire straits. So, where does Intel, along with its newest CEO, Lip-Bu Tan, go from here? Well, a lot of what Intel will be doing in the coming quarters and years is currently being laid out, and the company gave a small hint of what to expect from them. Starting with Panther Lake, this is going to be a key 18A product that will target the consumer segment. Intel says that they are focused on enabling the launch of Panther Lake this year, with the first SKU being delivered by the year-end and additional SKUs being planned for the first half of 2026. Intel has a lot riding on Panther Lake, and its success will help determine its next move point. However, Lip also states that the ramp of Panther Lake CPUs will be equally essential as the launch, since the margins on Panther Lake are going to be tight due to higher wafer costs. So once Panther Lake matures, and subsequently, the yields improve, they will get to the right "cost structure" which will be ultimately beneficial for them. Our foundry and product teams remain focused on enabling Panther Lake to launch this year. Next, on to our core x86 franchise. In client, our top priority is delivering our first Panther Lake SKU by year-end. followed by additional SKUs in the first half of 2026. The successful launch of the Panther Lake will solidify our strong share in the notebook market across consumer and enterprise. So, so far, I think it gives me a lot of confidence that we can launch our Panther Lake SKU by the end of the year. The second big driver of gross margins is the ramp that Lip-Bu just talked about of Panther Lake. Obviously, we're in the early stages of the maturity of Panther Lake. So the cost per wafer is going to be higher. And so that is going to drive some headwinds. Obviously, as Lip-Bu said, yields improve, more importantly, volumes increase. that reduces the cost. And so that will transition to a tailwind ultimately. I think next year, the big benefit for us is this significant ramp in Panther Lake given that we're bringing a fair amount of wafers back inside, so that drives a lower cost, and we get the better cost structure of Panther Lake showing up with the higher volumes, that's clearly going to be beneficial to us in terms of gross margin. That said, a lot of this will be determined on mix, and we'll have to see how things play out through next year in terms of the mix. Lip-Bu Tan - Intel CEO But what about next-gen? Well, Intel's CEO is also disclosing that its Nova Lake CPUs will close the gap in the high-end desktop market space. Nova Lake CPUs will be launching on both desktop and mobile platforms, but clearly, this lineup is more focused towards the desktop side, where AMD is showing them some brutal competition and leadership across all segments, performance, gaming, efficiency, and multi-threading. It is also stated that 18A will remain the foundation of at least three generations of client and server products, so it looks like Nova Lake will be using an optimized version of 18A. Nova Lake comes with up to 52 cores and the latest Xe graphics architecture, so really something to look forward too after the disastrous Arrow Lake desktop launch. We still have gaps to close in the high-end desktop market, but I'm encouraged by our unmatched go-to-market reach, our x86 ecosystem and the progress we are making on Nova Lake due out at the end of 2026. 18A is a foundation for at least 3 generation of our Intel client and server business products. Lip-Bu Tan - Intel CEO Switching over to the server-side, Intel confirms a new "Rapids" family, which will succeed Diamond Rapids. Diamond Rapids, expected next year, is going to feature Panther Cove P-Cores, while Clearwater Forest will be using Darkmont E-Cores. The E-Core lineup will also be launching next year and offers up to 288 cores. The successor to Diamond Rapids will be called Coral Rapids and is going to aim for a launch in 2028-2029, but it comes with a major change on the architecture side, which was dropped from Diamond Rapids. I think clearly, we are looking at review our road map. And then you mentioned about Clearwater Forest, then the Diamond Rapids. And clearly, I think the time frame is plus and minus 6 months. And I think overall, I think we are pretty much focused on that. And the next generation of the Coral Rapids, and clearly, we're going to review the whole coral market, and that will be on the '28, '29, and we make sure that we have a robust products to come out. I have also taken steps to correct past mistakes regarding multi-threading capabilities on our P-cores. I'm also making progress on bringing in new leadership in our data center business and look forward to being able to announce these changes next quarter. Lip-Bu Tan - Intel CEO The major change is that Intel is bringing back SMT to its P-Core architecture, at least on the server end. Starting with Coral Rapids, Intel will once again fuse SMT within its P-Core architecture, something that was entirely phased out with Lion Cove P-Cores and also the upcoming Panther Cove / Cougar Cove P-Cores. So it looks like Intel's engineers will be going back to the drawing board. The exclusion of SMT from its server lineup seems to have been a mistake, as Lip-Bu Tan states. So they are working to bring that back and are doubling down on it. It is also said that the mistake might have led to their server share dropping to 55% which is a bold confirmation. It means that AMD has crunched back a hefty 45% market share with its EPYC lineup, as reported a few days ago. So I think let me just look at the server market. Clearly, we still have about 55% market shares. And clearly, we have some mistakes we made on the high-end performing server area. And one thing is this called synchronized multi-trading. And I think it used to be Intel's strength, but somehow we overlooked it. And then now we are doubling down, making sure that we will have that performance gap we can narrow. And then meanwhile, we're also engaging with some of the big hyperscalers and also high-end enterprise. We learn what are the workload they require, and we're laser focused on getting the product road map clear and simplify and make it easier to work with us. Lip-Bu Tan - Intel CEO And lastly, there is a mention of Xe GPUs and the x86 CPU architecture, and how Intel plans to build and consolidate upon both ends. Surely, Xe GPUs will remain a core focus of the Blue Team for their AI strategy and also consumer-level products such as iGPUs. Even as of last week, the company is still adding support for its bigger "Battlemage" GPU. The discrete product family, such as "Arc," might not have been mentioned, and although there are reports that the company isn't giving up on discrete products any time soon, they might not be a major investment or might be scaled down further. We just hope that Intel continues with the Arc lineup, both for discrete products and integrated products. Finally, turning to AI. In the past, we approached AI with a traditional silicon and training-centric mindset without a cohesive silicon systems software stack and strategy. While we do need to build and consolidate upon our silicon franchise based upon our x86 CPU and our Xe GPUs, we recognize the need to move up the abstraction stack into system and software. This is the area where Intel has traditionally been weak or entirely absent. But we intend to incubate and grow these important skill sets and capabilities under my leadership. This will take time, but it will be vital for Intel to stay relevant in the next wave of computing. Lip-Bu Tan - Intel CEO So that's all for this round of earnings call, Intel has a lot riding on their back, and Lip-Bu Tan does sound very optimistic about some products but he also remains cautious about the progress of their foundry division, and while plans are underway with the restricting efforts, only time will tell how it all pans out for Team Blue. As one man said, you can do all the talking you want, but in the end, it's the products that do the real talking.