Intel to cut 15% of workforce, reports quarterly guidance miss

Intel shares slid as much as 20% in extended trading on Thursday after the chipmaker said it would lay off over 15% of its employees as part of a $10 billion cost-reduction plan and reported lighter results than analysts had envisioned.

The company also said that it will not pay its dividend in the fiscal fourth quarter of 2024 and that it will lower full-year capital expenditures by over 20%.

Here’s how the company did, compared to LSEG analyst estimates:

• Earnings per share: 2 cents adjusted vs. 10 cents expected
• Revenue: $12.83 billion vs. $12.94 billion expected

Intel’s revenue declined 1% year over year in the fiscal second quarter, which ended on June 29, according to a statement. The company swung to a $1.61 billion net loss, or 38 cents per share, from net income of $1.48 billion, or 35 cents per share, in the year-earlier period.

A decision to more rapidly produce Core Ultra PC chips that can handle artificial intelligence workloads contributed to the loss, CEO Pat Gelsinger said on a conference call with analysts.

“We previously signaled that our investments to be fine and drive the AI PC category would pressure margins in the near-term,” Gelsinger said. “We believe the trade-offs are worth it. The AI PC will grow from less than 10% of the market today to greater than 50% in 2026.”

The company’s Client Computing Group that makes PC chips contributed $7.41 billion in revenue, up 9% and right around the $7.42 billion consensus among analysts surveyed by StreetAccount. Intel said results tied to AI-friendly PC chips exceeded internal expectations and were on a path for over 40 million unit shipments in 2024.

Intel’s Data Center and AI unit posted $3.05 billion in revenue. The result was down 3% and lower than the $3.14 billion StreetAccount consensus.

For the fiscal third quarter, Intel called for an adjusted net loss of 3 cents per share on $12.5 billion to $13.5 billion in revenue. LSEG analysts expected adjusted net earnings of 31 cents per share on $14.35 billion in revenue.

During the fiscal second quarter, Intel announced that Apollo would invest $11 billion in a joint venture around a chip manufacturing plant in Ireland. The company also introduced Xeon 6 server processors, along with a Gaudi 3 accelerator for AI tasks.

In addition, Intel disclosed in May that the U.S. Commerce Department was revoking export licenses for consumer items to a customer in China, widely believed to be Huawei. Intel said fiscal second-quarter revenue would still be in its previously announced range of $12.5 billion to $13.5 billion, but below the middle of the range. Thursday’s outcome did line up with that update.

The jobs reduction, which will affect about 15,000 employees, will mainly take place this year, Gelsinger wrote in a memo. It’s the largest of any single job cut listed on Layoffs.fyi, an industry tracker that’s been operating since March 2020.

“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” he wrote. “Our revenues have not grown as expected — and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low.” 

On an adjusted basis, Intel said it expects around $20 billion in cuts this year, $17.5 billion in 2025 and more in 2026.

Excluding the after-hours drop, Intel stock has lost 42% of its value so far this year, while the S&P 500 index is up almost 14% in the same period.

This is breaking news. Please check back for updates.

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