Intel has fallen on hard times. In the second quarter of 2024, the chipmaker suffered a loss of $1.6 billion. This is significantly more than the company lost in the previous quarter – $437 million.
«Our financial performance in the second quarter was disappointing, despite the fact that we hit key product and technology milestones,» Intel CEO Pat Gelsinger admitted. «Our revenues did not grow as expected, and we have yet to fully capitalize on powerful trends such as artificial intelligence».
To remedy the difficult situation, Intel’s management is launching a large-scale restructuring and cost-cutting campaign. The new cost-saving plan calls for $10 billion in cost reductions by 2025.
«I want to share this painful news. I know it will be even harder for you to read»,” Pat Helsinger said in a note to employees.
On its way to recovery, Intel has announced layoffs of more than 15 thousand employees. In total, the company intends to cut more than 15% of its workforce as part of a $10 billion cost-cutting plan. The company currently employs more than 125,000 people, so the layoffs could affect up to 19,000 people.
In addition, Intel will cut research and development costs by billions every year until 2026. This will reduce capital expenditures by more than 20% this year. Additionally, the company will restructure to «stop non-essential work» and it will review «all active products and equipment» to make sure it does not spend too much.
It is worth noting that Intel’s revenue in the second quarter amounted to $12.8 billion, which is 1% less than last year. At the same time, the company’s products are not unprofitable. The PC and server processor business remains profitable. However, almost all losses in this and the previous quarters came from the Foundry chip business. The company is investing heavily in new fabs and EUV lithography. This particular area brought $7 billion in operating losses in 2023 and another $2.8 billion in operating losses in the second quarter of 2024. Although the company is going to receive up to $8.5 billion in funding from the US government under the CHIPS Act, this does not really help the situation.
Over the past two years, Intel has been balancing between profitable and unprofitable operations. As a result, for the period from the second quarter of 2022 to the first quarter of 2024, the company achieved a cumulative positive result of $1.1 billion. The last quarter offset this effect with $1.6 billion in losses.
«Intel is now the worst performing tech stock in the S&P 500 this year», — CNBC wrote in April.
After the announcement of the plan to lay off employees and cut costs, Intel shares fell by 20%, transmits Financial Times.
Source: The Verge