Intel’s New Mandate: 50% Gross Margin or No Go!

CNBC AI News – In a bid to shore up its bottom line, Intel is taking a hard line approach to project approval, sources report.

Speaking at the Bank of America Global Technology Conference, Intel’s Product Chief Executive Officer, Michelle Johnston Holthaus, delivered a clear message:

Intel will no longer greenlight projects that can’t demonstrate a minimum gross margin of 50%.

“This is probably something we should have had before, but we have it now, so if it can’t get to 50% or better gross margin, it’s not going forward,” Holthaus stated. Furthermore, she indicated that projects failing to meet the 50% target will not receive engineering resources.

While clarifying that Intel isn’t expecting all segments of its business to hit the 50% mark, Holthaus emphasized it’s a crucial internal benchmark.

Importantly, Intel’s roadmap for future products, including Panther Lake and Nova Lake, is currently projecting compliance with the targeted 50% gross margin.

This strategic shift is largely attributed to the influence of Intel’s new Chief Executive Officer, Pat Gelsinger, who is reportedly “deeply focused on getting the margins back above 50%.” To achieve this, Gelsinger is already reviewing and potentially revising or terminating unprofitable deals with external partners.

According to MacroTrends data, Intel’s trailing twelve-month gross margin for Q1 2025 stood at a mere 31.67%. This is a significant drop from historical levels, where margins consistently hovered around 60%. The descent began in Q2 2022, when margins dipped below the 50% threshold.

Holthaus anticipates an internal “tug-of-war” in the coming months as engineers and executives balance the needs of the market with maintaining efficient cost structures.

“We need to build products that fit the right competitive landscape, and meet the needs of the customer, but we also have to have the right cost structure. It’s really a case of both,” she explained, highlighting the crucial balancing act ahead.