Intel: ‘Fluid Trade Policies’ Have Increased Risk Of ‘Economic Slowdown’

‘The biggest risk we see is the impact of a potential pullback in investment and spending as businesses and consumers react to higher costs and the uncertain economic backdrop,’ says Intel CFO David Zinsner on the impact of tariffs and other challenges.

Intel CFO David Zinsner said “very fluid trade policies” set by the United States and other countries are helping increase the “chance of an economic slowdown,” which has prompted the chipmaker to expect a slump in near-term sales.

The semiconductor giant is forecasting revenue of $11.2 billion to $12.4 billion for its second-quarter revenue, a “wider-than-normal” range, Zinsner (pictured) said in the company’s first-quarter earnings call Thursday. That would represent a decrease of 2 to 12 percent sequentially for revenue, he added, in contrast to what has historically been flat growth.

While Intel CEO Lip-Bu Tan’s plan to cut costs and reinvest in engineering talent and technology road maps as part of his turnaround plan was the focus of the earnings call, the economic uncertainty and challenges caused by President Trump’s ever-changing tariff regime was another major topic on the earnings call.

Zinsner began his remarks by saying that Intel’s first-quarter results “mostly reflected our view entering the year that our two biggest markets were poised for growth.”

“On the client side, the end of service for Windows 10, the expected growing adoption of AI PCs and an aging install base following the COVID-era refresh pointed to a PC [total available market] growing 3 to 5 percent,” he said.

Zinsner added that Intel also expected “double-digit CPU core growth this year” in traditional servers, driven by customers catching up with “delayed infrastructure upgrades” that were caused by the “rapid adoption of AI servers in 2024.”

However, the CFO said, “the economic landscape has become increasingly uncertain, driven by shifting trade policies, persistent inflation and increased regulatory risk.”

“While we have yet to see a meaningful change in customer buying patterns, we think it's prudent to manage the business with a level of conservatism going into the second half of the year,” he said.

How Tariffs Impacted First-Quarter Revenue

For the first quarter of 2025 (ended March 29) Intel report revenue of $12.7 billion, flat in comparison to the same period last year. This was “at the high end” of the company’s guidance, “driven by better-than-expected Xeon sales,” according to Zinsner.

“We believe [first quarter] revenue benefited from customer purchasing behavior in anticipation of potential tariffs, though it is difficult to quantify the magnitude,” he said.

The company’s non-GAAP gross margin was 39.2 percent, roughly three percentage points above Intel’s guidance, thanks to “stronger than expected demand” for its Raptor Lake PC processors as well as “improved costs” for its Meteor Lake PC chips.

“While we continue to see the mix of AI PCs growing throughout the year, the rate of growth off a lower-than-expected [first quarter] will be lower,” Zinsner said.

Intel’s Client Computing Group revenue was $7.6 billion, down 13 percent sequentially and down 8 percent from the same period last year. Zinsner said this was “below typical seasonality and in line with our expectation, with higher-than-expected volumes offset by product mix and competitive pressure.”

The Data Center and AI reporting segment, on the other hand, saw revenue increase 8 percent year-over-year but decline 5 percent sequentially to $4.1 billion. Zinsner said this was “above expectations, driven by hyperscaler demand for host CPUs for AI servers and storage compute.”

Intel Foundry revenue was $4.7 billion, up 8 percent sequentially and up 7 percent from the same period last year. Zinsner said this was due to “pull-ins of Intel 7 wafers and increased advanced packaging services.”

How Tariffs Are Impacting Intel’s Sales Forecast

In addressing Intel’s second-quarter sales forecast, Zinsner talked about how changing trade policies across the world—kicked off by President Trump’s tariffs over the last few months—and the uncertainty it’s causing is impacting the company’s outlook.

“Historically, average sequential growth in [the second quarter] has been roughly flat with [the first quarter],” he said. “However, the very fluid trade policies in the US and beyond, as well as regulatory risks, have increased the chance of an economic slowdown with the probability of a recession growing. This makes it more difficult to forecast how we will perform for the quarter and for the year.”

Even though Intel has a “global, highly diversified manufacturing footprint to mitigate tariffs,” the company “will certainly see costs increase,” Zinsner said, and this is leading the company to anticipate a “contraction” in the total available market for its products.

Later in the call, he said one issue comes down to the time it will take for Intel to adjust its global supply chain based on current trade policies.

“We do have the ability to flex, to mitigate a lot of the headwinds we face. It's just [that] we can't obviously turn this stuff on a dime. It's going to take us time to optimize the network to what the rules are in terms of tariffs,” Zinsner said.

With Intel’s expectation for revenue to decline anywhere from 2 to 12 percent sequentially in the second quarter, the CFO said Data Center and AI revenue is expected to “decline at a faster rate” than sales from the Client Computer Group. The company is also estimating that Intel Foundry revenue will decline sequentially.

“The biggest risk we see is the impact of a potential pullback in investment and spending as businesses and consumers react to higher costs and the uncertain economic backdrop,” he said.