Intel Shares fell as much as 20% in extended trading Thursday after the chipmaker said it would lay off more than 15% of its workforce as part of a $10 billion cost-cutting plan and reported weaker-than-expected results .
The company also said it would not pay its dividend in the fiscal fourth quarter of 2024 and would cut full-year capital spending by more than 20 percent.
Here’s how the company did, compared to LSEG analyst estimates:
- Earnings per share: 2 cents adjusted vs. 10 cents expected
- Income: $12.83 billion versus $12.94 billion expected
Intel’s revenue fell 1 percent year over year in its fiscal second quarter, which ended June 29, according to statement. The company posted a net loss of $1.61 billion, or 38 cents per share, on net income of $1.48 billion, or 35 cents per share, in the prior period.
A decision to faster 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’ve previously indicated that our investments to be good and lead the AI computing category will pressure margins in the short term,” Gelsinger said. “We believe the trade-offs are worth it. PC AI will grow from less than 10% of the market today to more than 50% in 2026.”
In addition, Intel has decided to move Intel 4-chip and 3-chip wafers more quickly from a factory in Oregon to one in Ireland, which will lead to higher costs in the short term but a higher gross margin later, said Dave Zinsser, the company’s chief financial officer. .
Additionally, pricing was more competitive than planned during the quarter, Zinsser said. AMD, Qualcomm and other companies are working to take market share from Intel.
Computer chip maker Intel’s Client Computing Group contributed $7.41 billion in revenue, up 9% from the $7.42 billion consensus among analysts surveyed by StreetAccount. The company said results tied to AI-friendly computer chips exceeded internal expectations and was on track for more than 40 million unit shipments in 2024.
The Data Center and AI unit posted revenue of $3.05 billion. The result was down 3% and below the StreetAccount consensus of $3.14 billion.
For the fiscal third quarter, Intel called for an adjusted net loss of 3 cents per share on revenue of $12.5 billion to $13.5 billion. LSEG analysts had expected adjusted net earnings of 31 cents per share on revenue of $14.35 billion. Zinsser said data center revenue should increase sequentially in the second half of the fiscal year, “as demand for traditional servers improves modestly.”
But he said consumption and trade spending have weakened, particularly in China, and a continued emphasis on cloud-based servers for artificial intelligence led Intel to lower its total addressable market for 2024.
During the fiscal second quarter, Intel announced that Apollo would invest 11 billion dollars in a joint venture around a chip manufacturing plant in Ireland. The company too was introduced Xeon 6 server processors, along with a Gaudi Accelerator 3 for AI tasks.
In addition, Intel show up in May that the US Commerce Department was revoking the consumer goods export licenses of a customer in China widely believed to be Huawei. Intel said second-quarter fiscal revenue would still be in the previously announced range of $12.5 billion to $13.5 billion, but below the middle of the range. Thursday’s result goes hand in hand with this update.
The job cuts, which will affect about 15,000 workers, will mostly take place this year, Gelsinger wrote in note. It’s the largest of any job cut reported on Layoffs.fyi, an industry tracker running since March 2020.
“Simply put, we need to align our cost structure with our new operating model and fundamentally change the way we operate,” he wrote. “Our revenue hasn’t grown as expected — and we haven’t yet fully benefited from powerful trends like artificial intelligence. Our costs are too high, our margins too low.”
On an adjusted basis, Intel said it expects about $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 has risen nearly 14% over the same period.
This is breaking news. Check back for updates.
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