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

Intel
CEO
Pat
Gelsinger
holds
a
sample
of
a
wafer
during
his
keynote
speech
at
the
Computex
conference
in
Taipei
on
June
4,
2024.

I-hwa
Cheng
|
AFP
|
Getty
Images

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.”

Additionally,
Intel
decided
to
more
quickly
move
Intel
4
and
3
chip
wafers
from
a
plant
in
Oregon
to
one
in
Ireland,
which
will
lead
to
higher
costs
in
the
short
term
but
a
wider
gross
margin
later,
said
Dave
Zinsser,
the
company’s
finance
chief.

Plus,
pricing
was
more
competitive
than
planned
during
the
quarter,
Zinsser
said.

AMD,

Qualcomm
and
other
companies
have
been
working
to
take
market
share
from
Intel.

Intel’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.
The
company
said
results
tied
to
AI-friendly
PC
chips
exceeded
internal
expectations
and
were
on
a
path
for
over
40
million
unit
shipments
in
2024.

The
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.
Zinsser
said
data
center
revenue
should
grow
sequentially
in
the
second
half
of
the
fiscal
year,
“as
demand
for
traditional
servers
improves
modestly.”

But
he
said
consume
and
commercial
spending
has
weakened,
particularly
in
China,
and
a
continued
emphasis
on
cloud-based
servers
for
AI
have
led
to
Intel
to
reduce
its
2024
total
addressable
market.

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.”