Intel Corporation Apple Inc. shares fell about 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 results that were lighter than analysts had anticipated.
The company also said it will not pay its dividend in the fourth quarter of fiscal 2024 and that it will cut capital spending for the full year by more than 20%.
Here's how the company is performing, compared to LSEG analysts' estimates:
Earnings per share: 2 cents adjusted vs. 10 cents expectedRevenue: $12.83 billion vs. $12.94 billion expected
Intel’s revenue fell 1% year over year in the fiscal second quarter, which ended June 29, according to a statement. The company swung to a net loss of $1.61 billion, or 38 cents per share, from net income of $1.48 billion, or 35 cents per share, in the year-ago period.
The decision to accelerate production of Core Ultra PC chips that can handle AI workloads contributed to the loss, CEO Pat Gelsinger said on a conference call with analysts.
“We have previously indicated that our investments in smart PCs will squeeze margins in the near term,” Gelsinger said. “We believe the trade-offs are worth it. Smart PCs will grow from less than 10% of the market today to more than 50% in 2026.”
In addition, Intel has decided to move Intel Series 4 and 3 chips more quickly from a plant in Oregon to a plant in Ireland, which will lead to higher costs in the near term but a wider overall profit margin later, said Dave Zinser, the company's chief financial officer.
Moreover, pricing was more competitive than planned during the quarter, Zinser said. AMD, Qualcomm Other companies are working to take market share from Intel.
Intel’s client computing group, which makes PC chips, contributed $7.41 billion in revenue, up 9% and about the $7.42 billion consensus of analysts surveyed by StreetAccount. The company said results related to its AI-friendly PC chips beat internal expectations and it was on track to ship more than 40 million units in 2024.
The data center and artificial intelligence unit reported revenue of $3.05 billion, down 3% and below the StreetAccount consensus of $3.14 billion.
For the fiscal third quarter, Intel expects an adjusted net loss of 3 cents per share on revenue of $12.5 billion to $13.5 billion. That means
LSEG analysts expected adjusted net earnings of 31 cents a share on revenue of $14.35 billion. Data center revenue is expected to grow sequentially in the second half of the fiscal year, “as demand for traditional servers improves modestly,” Zinser said.
But he said consumer and business spending has weakened, especially in China, and that a continued focus on cloud-based servers for AI has pushed Intel to shrink its total addressable market by 2024.
During the second fiscal 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 the Gaudi 3 accelerator for AI tasks.
Additionally, Intel disclosed in May that the U.S. Department of Commerce had revoked consumer goods export licenses for a customer in China, widely believed to be Huawei. Intel said fiscal second-quarter revenue would remain within its previously announced range of $12.5 billion to $13.5 billion, but was below the midpoint. The result it reported Thursday was in line with that update.
The job cuts, which will affect about 15,000 employees, will occur primarily this year, Gelsinger wrote in a note. They’re the largest of any single job cuts listed on Layoffs.fyi, an industry tracker that has been running since March 2020.
“Simply put, we have to align our cost structure with our new operating model and fundamentally change the way we do business,” he wrote. “Our revenues have not grown as expected — and we have not yet fully benefited from powerful trends, like AI. Our costs are too high, and our margins are too low.”
On an adjusted basis, Intel said it expects cuts of about $20 billion this year, $17.5 billion in 2025 and more in 2026.
Before the after-hours drop, Intel stock had lost 42% of its value so far this year, while the S&P 500 index had gained about 14% over the same period.
Now Intel is looking to the future. It has relied on Taiwan. Taiwan Chip Manufacturing Co. The company is currently working on its AI-compatible Lunar Lake computer chips, which entered production last month. The next step is to launch the next generation of Panther Lake based on its own production line, which should lead to a better cost structure, Zinser said.
“Obviously, just as there was a lot of outdoor tile in 2025, we’re bringing it home in 2026,” Gelsinger said. “That’s when we’ll really start, as Dave said, to see the benefits of the model we’ve put in place. The tile that’s coming home, the drive technology, the drive products, starts in 2025, and it’s going to be a big success in 2026 and beyond.”
WATCH: Your Best Choice: Bill Baruch Closes New Intel Options Deal
