Intel shares plunged by 20% in extended trading after the chipmaker announced a major restructuring plan that includes laying off over 15% of its employees and a $10 billion cost reduction scheme. The company reported disappointing results for the fiscal second quarter of 2024, missing analyst estimates for both earnings per share ($0.02 adjusted vs. $0.10 expected) and revenue ($12.83 billion vs. $12.94 billion expected).
According to a statement released by Intel, the company saw a 1% decline in revenue year-over-year, resulting in a net loss of $1.61 billion or 38 cents per share, compared to a net income of $1.48 billion or 35 cents per share in the same quarter the previous year. CEO Pat Gelsinger attributed the loss to investments in producing Core Ultra PC chips capable of handling artificial intelligence workloads, which he believes will drive growth in the AI PC market to over 50% by 2026.
The restructuring plan also includes a decision to suspend dividend payments in the fiscal fourth quarter of 2024 and reduce full-year capital expenditures by over 20%. Additionally, Intel disclosed plans for significant job cuts affecting around 15,000 employees, making it the largest single job cut listed on industry tracker Layoffs.fyi. Gelsinger emphasized the need to realign the company’s cost structure with its new operating model to capitalize on emerging trends like AI.
Despite the disappointing financial results and stock price decline, Intel remains optimistic about its AI-friendly PC chips and server processors. The company introduced Xeon 6 server processors and Gaudi 3 accelerators for AI tasks in the second quarter and secured an $11 billion investment for a chip manufacturing plant in Ireland.
Looking ahead, Intel expects further cuts of around $20 billion this year, $17.5 billion in 2025, and more in 2026. The company’s stock has lost 42% of its value year-to-date, contrasting with the S&P 500 index, which has gained almost 14% during the same period.
The implications of Intel’s restructuring and financial performance for the industry and consumers remain to be seen, with industry experts highlighting the need for the company to adapt to changing market dynamics and technological advancements to regain its competitive edge.
