[News] Intel’s Earnings Fall Short, Cutting Over 15% of Workforce

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Intel not only reported earnings and forecasts that fell short of Wall Street expectations but also announced plans to cut more than 15% of its workforce, halt dividend payments for Q4 2024 (October-December), and reduce its full-year capital expenditure forecast by more than 20%.

According to Intel’s official announcement, its Q2 (April-June) earnings: adjusted earnings per share were $0.02, far below the analyst estimate of $0.10; revenue decreased by 1% year-over-year to USD 12.83 billion, missing the market expectation of USD 12.94 billion; and adjusted gross margin was 35.4%

During Q2, Intel’s Client Computing Group, responsible for producing PC processors, saw its revenue increase by 9% year-over-year to USD 7.41 billion, meeting the market expectation of USD 7.42 billion. However, the revenue from the Data Center and AI Group fell by 3% year-over-year to USD 3.05 billion, missing the market expectation of USD 3.14 billion.

Intel stated that sales of PC chips capable of handling AI tasks exceeded internalAI expectations, with shipments expected to surpass 40 million units in 2024.

Looking ahead to Q3, Intel forecasts revenue between USD 12.5 billion and USD 13.5 billion and an adjusted loss per share of $0.03. According to a report from Reuters citing an LSEG survey, analysts had originally predicted Q3 revenue to reach USD 14.35 billion with an adjusted earnings per share of $0.31. Intel’s adjusted gross margin for the quarter is expected to be 38%.

Intel CEO Pat Gelsinger stated that the latest layoff plan will affect about 15,000 employees. This is the largest single layoff action tracked by tech layoff monitoring site Layoffs.fyi since it began operations in March 2020. Intel currently employs around 110,000 people, meaning over 15% of its workforce will be impacted.

Gelsinger further pointed out that Intel must align its cost structure with the latest operational model and fundamentally change the way the company operates. He indicated that Intel’s revenue growth has not met expectations and has not yet benefited from powerful trends such as AI.

According to Intel’s statement, Intel will suspend dividend payments starting in Q4 until cash flow improves significantly. Since 1992, Intel has consistently paid dividends without interruption.

Intel has also decided to reduce its total capital expenditure budget for new plants and equipment in 2024 by over 20% to between USD 25 billion and USD 27 billion. The estimated total capital expenditure for 2025 will be between USD 20 billion and USD 23 billion.

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(Photo credit: Intel)