Intel (INTC.US) wields the "layoff" sword again ahead of Q2 report—can its data center business support a valuation recovery?

According to Zhitong Finance APP, semiconductor giant Intel (INTC.US) is scheduled to release its second-quarter earnings report after the close on July 23. Analysts’ consensus expects Intel’s earnings per share to be $0.22, with revenue at $14.45 billion.

On the eve of the earnings report, a new round of layoffs in Intel’s Data Center and AI (DCAI) division has sparked heated discussion. Wedbush Securities noted that Intel’s latest round of layoffs (this time in the data center division) indicates that CEO Pat Gelsinger is still restructuring the company’s organizational framework.

Analyst Matt Bryson wrote in a report to clients, “Intel stated that its product commitments and roadmap remain unchanged, and characterized this move as an effort to streamline its Data Center and AI division (DCAI). This is also part of its overall restructuring plan—which over the past four years has reduced the company’s total headcount by about 40%, decreasing from around 132,000 employees in 2022 to about 81,000,” “We believe this news continues to indicate that Pat Gelsinger has not yet completed the reshaping of Intel’s architecture (though there are signs of improved execution and underlying demand conditions are also improving).”

It remains unclear how many employees will be affected. Intel pointed out that the layoffs will not change its product commitments or company roadmap; instead, Intel hopes these changes will improve efficiency.

Intel’s Data Center and AI (DCAI) division mainly focuses on server CPUs, custom AI chips, and data center architecture. In the first quarter of 2026, the division’s revenue increased by 22% year-on-year, reaching $5.05 billion.

An Intel spokesperson stated, “As part of our overarching strategy to build a more focused and efficient company, our data center division is adjusting its organizational structure to ensure the right roles and skills for the long-term success of this business,” “We are committed to respecting all affected employees and providing resources to support them through this transition.”

AI Wave and the Recovery of Data Center (DCAI) Demand

Analysts noted that the AI industry is gradually evolving from “GPU-driven large model training” to “CPU-coordinated real-time inference and Agent architectures.” This trend is reactivating the strong market demand for high-performance server CPUs. According to Wall Street expectations, the Data Center and AI division (DCAI) will be the main pillar supporting Intel’s performance and profit margin recovery in the second quarter.

Besides traditional chip sales, the market is particularly focused on management’s latest outlook for Intel Foundry Services, as discussed in the earnings call. HSBC recently raised its price target for Intel to $200, with its core rationale being optimism over the improved yields of advanced nodes like 18A and the progress in potential external client deals (such as Tesla, Apple, etc.).