Intel is facing tough times. For the second quarter of 2024, the chipmaker reported a loss of $1.6 billion, a significant increase from the $437 million loss it experienced in the previous quarter.
"Our financial results for the second quarter are disappointing, even though we achieved key milestones in product and technology advancements," acknowledged Intel CEO Pat Gelsinger. "Our revenues did not grow as expected, and we have yet to fully capitalize on powerful trends like artificial intelligence."
To address its challenging situation, Intel's management is initiating a comprehensive restructuring and cost-cutting campaign. The new cost-saving plan aims to reduce expenses by $10 billion by 2025.
“I want to share this painful news. I know it will be even harder for you to read,” Gelsinger stated in a memo to employees.
On its path to recovery, Intel has announced the layoff of over 15,000 employees. Overall, the company plans to reduce its workforce by more than 15% as part of the $10 billion expense reduction plan. Currently, the company employs over 125,000 workers, meaning layoffs could affect up to 19,000 people.
Additionally, Intel will be cutting research and development expenses by billions annually until 2026. This is expected to result in a more than 20% reduction in capital expenditures this year. Furthermore, the company will undertake a restructuring to "halt non-essential work" and will review "all active projects and equipment" to avoid excessive spending.
It's worth noting that Intel's revenue for the second quarter amounted to $12.8 billion, which is 1% lower compared to the previous year. Nonetheless, the company’s products are not unprofitable. The business of producing processors for PCs and servers remains lucrative. However, almost all of the losses in this and the previous quarters originated from its Foundry chip manufacturing business. The company is investing heavily in new factories and EUV lithography, which incurred $7 billion in operating losses in 2023 and an additional $2.8 billion in operating losses in the second quarter of 2024. While the company plans to secure up to $8.5 billion in U.S. government funding under the CHIPS Act, it has not significantly alleviated the situation.
Over the past two years, Intel has been balancing on the line between profitable and unprofitable operations. As a result, from the second quarter of 2022 to the first quarter of 2024, the company reported a cumulative positive result of $1.1 billion. The latest quarter nullified this effect due to a $1.6 billion loss.
"Intel is now the worst-performing tech stock in the S&P 500 this year," CNBC reported in April.
Following the announcement of its layoff and cost-cutting plan, Intel's shares fell by 20%, according to the Financial Times.
Source: The Verge
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