Intel (INTC) announced its first quarter earnings results after the bell on Thursday, beating analysts' expectations on the top and bottom lines. But the company's Q2 outlook fell short of Wall Street's estimates, sending the stock sliding.

Intel said it anticipates Q2 revenue of between $12.5 billion and $13.5 billion. Analysts were anticipating $13.63 billion for the coming quarter.

Intel is looking to grow its AI market share by challenging rivals Nvidia (NVDA) and AMD (AMD) with its new Gaudi 3 AI accelerator while hoping it can woo consumer and enterprise customers with its AI PC lineup.

The company reported earnings adjusted per share (EPS) of $0.18 on revenue of $12.72 billion. Wall Street was expecting an EPS of $0.13 and revenue of $12.71 billion, according to consensus data compiled by Bloomberg. Intel reported a loss per share of $0.04 on revenue of $11.7 billion in the same quarter last year.

“We are making steady progress against our priorities and delivered a solid quarter,” Intel CEO Pat Gelsinger said in a statement. “Strong innovation across our client, edge and data center portfolios drove double-digit revenue growth in Intel Products.

Intel is in the midst of transforming itself from a designer and manufacturer of its own chips to a manufacturer of chips for third-party clients. So far, the company said it has six customers, including Microsoft (MSFT), which is developing its own custom chips.

The first quarter marks the first time Intel is reporting earnings under its new corporate structure. The company now reports revenue from its Client Computing Group, Data Center and AI, and Network and Edge divisions under its Intel Products segment. Altera, Mobileye, and Other now report under the All Other Segment, while Intel’s Foundry business reports under Intel Foundry. In announcing the restructuring, however, Intel also revealed that its foundry business lost $7 billion in the last year.

For the quarter, Intel saw Intel Products revenue of $11.9 billion, up 17% year over year on strong performance from its Client Computing Group. That segment saw revenue of $7.5 billion, up 31% thanks to a rebound in the PC market.

Foundry revenue totaled $4.4 billion, down 10% year over year, while All Other revenue came in at $775 million, down 46% year over year.

The move to a foundry model puts Intel into direct competition with TSMC (TSM), the world's largest chip manufacturer. But there are doubts that the third-party foundry business will ever be a significant source of revenue.

Intel is looking to capitalize on the AI craze through the PC market with its new Core Ultra processors. The chips, which feature built-in neural processing units (NPUs), are designed to run AI models on your laptop, rather than in the cloud. The idea is that you can take advantage of AI apps without having to connect to the web or share your data.