Intel Stock Nosedives After Announcing Major Cost-Cutting Measures

Chipmaker Intel (INTC) Reports Disappointing Q2 Earnings, Reveals $10 Billion Cost Reduction Plan

On Thursday, Intel (INTC) disclosed its second-quarter earnings, revealing a miss on both revenue and profit projections. The company announced a $10 billion cost-cutting strategy, which includes reducing its workforce by 15% and suspending dividend payments.

The announcement forecasted Q3 revenue between $12.5 billion and $13.5 billion, falling short of analysts’ expectations of $14.3 billion. Consequently, Intel’s stock plummeted over 20% in pre-market trading on Friday.

Intel is currently undergoing a significant transformation to regain market share from competitor AMD (AMD) and expand its AI chip and third-party foundry businesses. This effort comes as the PC market shows early signs of recovery after eight quarters of decline post-COVID-19 boom.

The company reported an earnings per share (EPS) of $0.02 on revenue of $12.8 billion, missing the expected EPS of $0.10 and revenue of $12.9 billion. This is a decline from the previous year’s Q2, where EPS was $0.13 on revenue of $12.9 billion.

Bloomberg reports that Intel plans to lay off thousands of employees soon. The company is investing heavily in global factories and facilities to reclaim its position in the chip manufacturing sector, which is currently dominated by Taiwan Semiconductor (TSMC).

Intel’s Data Center and AI segment generated $3.05 billion, slightly below the $3.07 billion expectation. Despite the rising demand for CPUs and GPUs to support AI applications, Intel’s GPUs lag behind Nvidia’s (NVDA) in popularity for AI processing.

Intel’s stock has dropped 38% year to date, compared to AMD’s 3.7% decline. Nvidia, however, has seen its shares rise by 127%.

Despite the focus on Data Center and AI, Intel’s Client segment, which includes chips for enterprise and consumer computers, remains its largest business. The Client segment reported $7.4 billion in revenue, slightly below the anticipated $7.5 billion but an increase from $6.7 billion the previous year.

Intel’s upcoming products, including a response to Qualcomm’s processors, are expected to launch this fall. Additionally, Intel is opening its foundries to third-party chip designers, aiming to rival TSMC’s foundry business. However, Intel remains its own biggest client, and while there are interested customers like Microsoft, gaining significant market traction will take time.