Intel’s Q2 2024 Disaster: $1.6 Billion Loss and Massive Layoffs Send Stock Crashing

Intel Corporation (NASDAQ: INTC) has reported severe financial setbacks in its second-quarter 2024 earnings report, leading to a suspension of its dividend and the termination of up to 19,650 employees. Following this announcement, Intel’s stock plummeted by over 24% in pre-market trading.

Intel’s financial performance in Q2 2024 fell short of expectations, with revenues dipping to $12.8 billion from $12.9 billion in the same period last year. The company’s gross margin decreased slightly to 35.4% from 35.8%, and net income swung to a loss of $1.6 billion from a profit of $1.5 billion in Q2 2023.

CEO Pat Gelsinger commented, “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation.”

“By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet,” CFO David Zinsner added.

Strategic restructuring and cost reduction

In response to the disappointing results, Intel is embarking on a comprehensive restructuring plan aimed at reducing operating expenses, capital expenditures, and workforce. The company intends to streamline operations significantly, aiming to reduce non-GAAP R&D and marketing, general, and administrative expenses to approximately $20 billion in 2024 and $17.5 billion in 2025. This involves a reduction in headcount by more than 15%, with most layoffs expected to be completed by the end of 2024.

Intel’s shift towards capital efficiency includes reducing gross capital expenditures by over 20% from previous projections, aiming for $25 billion to $27 billion in 2024. The company expects net capital spending to be between $11 billion and $13 billion. In 2025, these figures are targeted to be $20 billion to $23 billion for gross capital expenditures and $12 billion to $14 billion for net capital spending.

The restructuring will impact various business units within Intel. The Client Computing Group (CCG) saw revenue growth of 9% to $7.4 billion, driven by the increasing demand for AI PCs. Intel has shipped over 15 million AI PCs since December 2023 and is on track to ship over 40 million by year-end. The next-generation AI CPU, Lunar Lake, is set to begin shipments in Q3 2024.

In contrast, the Data Center and AI (DCAI) segment experienced a 3% decline in revenue to $3.0 billion. However, Intel remains optimistic about its next-generation Intel Xeon processors and the upcoming launch of the Intel Gaudi 3 AI accelerator, which promises to deliver double the performance per dollar compared to leading competitors.

The Network and Edge (NEX) segment saw a slight decline in revenue to $1.3 billion, but Intel announced AI-optimized Ethernet solutions and new infrastructure processing unit (IPU) adaptors, which are expected to drive future growth.

Outlook and long-term strategy

Despite short-term financial challenges, Intel continues to prioritize long-term strategic investments. The company is on track to complete its ambitious five-nodes-in-four-years strategy, with Intel 18A expected to be manufacturing-ready by the end of the year. Production volumes are anticipated to start in the first half of 2025. Intel also announced the availability of reference flows for its EMIB advanced packaging technology, aimed at simplifying the design process and enhancing flexibility.

Gelsinger emphasized the importance of these investments, stating, “These actions, combined with the launch of Intel 18A next year to regain process technology leadership, will strengthen our position in the market, improve our profitability, and create shareholder value.”

Intel’s decision to suspend its dividend starting in the fourth quarter underscores its focus on preserving liquidity to support essential investments. The company’s board of directors declared a quarterly dividend of $0.125 per share, payable on September 1, 2024, to shareholders of record as of August 7, 2024.

Looking ahead, Intel’s guidance for Q3 2024 includes expected revenues between $12.5 billion and $13.5 billion, with a GAAP gross margin of 34.5% and a non-GAAP gross margin of 38.0%. The company projects a GAAP loss per share of $0.24 and a non-GAAP loss per share of $0.03.


Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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