Intel Stock Drops on Larger-Than-Anticipated Loss and Layoffs to Reduce Expenses

Intel stock decline,With 15% of its personnel laid off and a dividend suspension

After the business reported a larger-than-expected loss and announced plans to lay off 15% of its personnel as part of a $10 billion cost-cutting strategy, Intel (INTC) shares fell sharply during extended trading on Thursday.

One Intel. Intel reports financial results for the second quarter of 2024 and announces a $10 billion cost reduction plan to boost productivity and competitiveness in the market.

The chipmaker saw a swing to a $1.6 billion loss in the second quarter from a $1.5 billion profit in the same period last year, missing expectations on both its top and bottom lines. $12.8 billion in revenue , 1% less than the previous year.

“Higher than usual charges related to non-core businesses, the impact from unused capacity, and gross margin headwinds from the accelerated ramp of our AI PC product were the factors that affected the second-quarter results,” stated CFO David Zinsner.

Intel stated that it anticipates revenue for the third quarter of $12.5 billion to $13.5 billion, significantly less than the $14.3 billion analysts had projected. Analysts had predicted a profit of three cents per share, but it predicted a loss of twenty-four cents.

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• Thursday’s extended trading saw a sharp decline in Intel shares following the company’s larger-than-expected loss announcement.
• According to CFO David Zinsner, the second-quarter results were adversely impacted by gross margin challenges related to Intel’s AI PC product and rising costs.
• The chipmaker announced that as part of a $10 billion cost-cutting plan, 15% of its personnel will be let go.

 

A $10 billion cost-cutting plan that involves layoffs

By the end of 2024, Intel promised to cut 15% of its workforce in order to save expenses. more cost-cutting efforts include cutting marketing, general and administrative, and research and development (R&D) spending to $20 billion in 2024, with more reductions in 2025 and 2026.

According to a statement, Intel’s revenue for the fiscal second quarter, which concluded on June 29, decreased by 1% year over year. From net profits of $1.48 billion, or 35 cents per share, in the year-ago period, the corporation plunged to a $1.61 billion net loss, or 38 cents per share.

On a conference call with analysts, CEO Pat Gelsinger stated that some of the loss was caused by the decision to create Core Ultra PC chips—which can perform artificial intelligence workloads—more quickly than anticipated.

We think the compromises are worthwhile. By 2026, the AI PC will account for more than 50% of the market, up from less than 10% at the moment.

 

Furthermore, Intel made the decision to expeditiously relocate Intel 4 and 3 chip wafers from an Oregon factory to an Ireland plant. This would result in increased short-term expenses but a larger gross margin in the long run, according to Intel’s chief financial officer, Dave Zinsser.

 

In addition, Zinsser stated that during the quarter, pricing was more competitive than anticipated. AMD

, Qualcomm

and other businesses have been vying with Intel for market share.

 

Revenue from Intel’s Client Computing Group, which produces PC processors, was $7.41 billion, up 9% from the previous year and almost in line with the $7.42 billion consensus estimate of StreetAccount’s panel of analysts. According to the business, sales of AI-friendly PC chips surpassed internal projections and were expected to reach 40 million units by 2024.

 

The revenue for the Data Center and AI unit was $3.05 billion. The outcome was less than the $3.14 billion StreetAccount estimate and down 3%.

 

Intel predicted an adjusted net loss of 3 cents per share on $12.5 billion to $13.5 billion in revenue for the third quarter of its fiscal year. On $14.35 billion in revenue, LSEG analysts projected adjusted net earnings of 31 cents per share. Zinsser stated that “as demand for traditional servers improves modestly,” data center revenue should increase sequentially in the second half of the fiscal year.

 

However, he claimed that the decline in consumer and business expenditure, especially in China, along with the ongoing focus on cloud-based servers for artificial intelligence, have caused Intel to lower its 2024 total addressable market projection.

 

Intel declared in its fiscal second quarter that Apollo would put $11 billion into a joint venture centered on an Irish chip manufacturing facility. The business also unveiled the Gaudi 3 accelerator for AI applications and Xeon 6 server CPUs.

 

Furthermore, Intel revealed in May that the US Commerce Department was canceling consumer goods export permits to a Chinese client, who is largely assumed to be Huawei. Intel stated that its fiscal second-quarter revenue would fall short of the midpoint of its previously disclosed range of $12.5 billion to $13.5 billion. The results on Thursday did match that update.

 

The roughly 15,000 affected employees will primarily lose their jobs this year, according to a memo written by Gelsinger. It is the biggest job cut that has ever been reported on Layoffs.Just so you know, the industry tracker has been running since March 2020.

our revenues, and we haven’t yet completely benefited from significant trends like AI. Our margins are very thin and our costs are too high.

Intel stated that, when adjusted for inflation, it anticipates cutting roughly $20 billion this year, $17.5 billion in 2025, and more in 2026.

With the after-hours decline excluded, Intel’s stock has lost 42% of its value this year, compared to an over 14% increase in the S&P 500 index during the same time frame.