Intel confirmed on Tuesday that it will cut an unspecified number of jobs in its data center group, the division responsible for Xeon server processors and AI-related hardware, as part of a broader restructuring under CEO Lip-Bu Tan. Shares rose as much as 8 percent in early trading, extending a rally that has seen the stock more than double this year. The cuts come two days before Intel reports second-quarter earnings on Thursday.

The company said the data center group is “aligning its organization to ensure it has the right roles and skills in place to position the business for long-term success,” without specifying how many positions would be eliminated. A person familiar with the matter told Bloomberg that the changes would not affect the unit's product commitments or roadmaps. The data center and AI division posted $5 billion in revenue last quarter, up 22 percent year over year, driven by rising demand for Xeon processors used in AI data centres.

That revenue growth highlights the paradox at the centre of the cuts. Intel is trimming headcount in the same business unit that is powering its financial recovery, a sign that Tan views the turnaround as a question of efficiency rather than scale. The Xeon line has found a growing role as the host processor in AI systems, including Nvidia's own Vera Rubin platform, but Intel still has not produced a competitive AI accelerator chip to rival Nvidia's GPUs, a failure that has cost it billions in lost revenue.

Tan, who replaced the ousted Pat Gelsinger in March 2025, has cut tens of thousands of jobs since taking over. Intel ended last quarter with about 83,200 employees, down from a peak of nearly 132,000 in 2022, and the company has said it expects to finish the year with roughly 75,000. The layoffs are part of a pattern across the technology industry, where companies from Meta to Oracle have shed workers while simultaneously increasing spending on AI infrastructure.

The US government holds a 10 percent stake in Intel acquired through converted CHIPS Act grants, a position now worth tens of billions after the stock's surge under Tan's leadership. The turnaround has been driven by Intel's 18A manufacturing process reaching high-volume production, foundry partnerships with Apple and Amazon, and the Xeon business capturing demand from the AI data centre buildout.

Intel reports earnings on Thursday after the market close, and the data center group's results will be the number investors watch most closely. The question is whether the revenue trajectory justifies a stock that has more than tripled from its 2024 lows, or whether the market has already priced in more progress than the fundamentals support.