Semiconductor giant Intel (INTC +0.78%) slashed its dividend in 2023 and then pulled the plug completely in 2024 amid chronic struggles and weak financial performance. The initial dividend cut helped the company preserve cash as it plowed capital into its manufacturing operations, while the dividend suspension was coupled with significant layoffs and came a few months before former CEO Pat Gelsinger was shown the door.
While Intel has a new CEO with plans to aggressively cut costs and streamline operations, the dividend is unlikely to make a comeback any time soon.
Image source: Getty Images.
A deteriorating balance sheet
Intel has spent the past few years investing in new manufacturing facilities and new process technologies in a bid to regain its manufacturing advantage against TSMC and build out a foundry business of its own. This was always going to be a multiyear endeavor that consumed far more cash than it produced in the beginning. Even today, with the Intel 18A process marching toward volume production, the foundry business generates minimal revenue from external customers.
This heavy spending occurred just as Intel's products business hit the skids. A severe downturn in PC demand following a pandemic-era boom hurt the client computing business, as did competition from AMD. In the data center segment, strong products from AMD and a shift in spending toward AI accelerators knocked down revenue and decimated profits.
The net result of all of this is a balance sheet that has taken a beating. While Intel had around $21 billion in cash and short-term investments at the end of the first quarter of 2025, it also had more than $50 billion in debt. Intel's debt load has been climbing for the past 15 years, rising from next to nothing in 2010 to nearly $30 billion in 2020 and topping $50 billion today.
INTC Total Long Term Debt (Annual) data by YCharts.
Intel has plenty of cash on hand but needs a big buffer to continue its manufacturing investments and weather an uncertain economic environment. Until Intel's debt is reduced, a dividend is highly unlikely.
Profit and cash-flow troubles
Intel's products business, which includes all its first-party PC CPUs, server CPUs, and other products, is still profitable. In the first quarter, the products business generated an operating income of $2.9 billion on $11.7 billion in revenue.
The problem is the foundry business, which currently generates nearly all its revenue internally from Intel's products business. The foundry business registered an operating loss of $2.3 billion and less than $1 billion in revenue in the first quarter. Add in corporate operating expenses, and Intel produced a total operating loss of $301 million for the quarter.
The cash-flow situation looks much worse since Intel's capital spending is vastly outpacing depreciation, thanks to its manufacturing investments. Intel poured more than $5 billion into capital expenditures in the first quarter alone, leading to an adjusted free-cash-flow loss of roughly $3.7 billion. At the moment, Intel's products business isn't generating nearly enough cash to fund the company's ongoing investments.
Intel is spinning off and selling off non-core businesses, including the recent sale of a majority stake in Altera, and it reduced its target for gross capital spending in 2025 by $2 billion to $18 billion. Those moves will help the situation, but a rebound in the products business and an influx of external revenue in the foundry business are going to be necessary for the company to even consider restarting its dividend.
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Key Data Points
The dividend could return, but it will take a while
Under new CEO Lip-Bu Tan, Intel is planning to slash costs, remove layers of middle management, and downsize its workforce. The company is also putting a renewed focus on engineering and listening to its customers, the latter of which will be critical to winning major foundry customers. Intel's first chips using the Intel 18A process will start shipping by the end of this year, potentially ending AMD's manufacturing lead by catching up to TSMC in terms of performance and efficiency.
While Intel's turnaround could gain traction in 2026, the dividend isn't likely to return for some time. Intel has a lot of work left to do to stabilize and then grow its CPU market share and still needs to win major foundry customers and ramp up external foundry revenue.
Once all that happens, improving the balance sheet and reducing debt should be the top priority. The dividend is probably not a priority right now, and it will likely be years before the company seriously considers restarting dividend payments to investors.
