Intel revealed plans to reduce its headcount by more than 15%
Intel reported a $1.6 billion loss in Q2 Thursday, resulting in its shares sliding as much as 20%. As part of its statement detailing the disappointing results, the company outlined plans to reduce its headcount by more than 15%. The cuts, most of which will be executed by the end of the year, are part of a multi-billion dollar cost saving plan, and according to CEO Pat Gelsinger will improve Intel’s “profitability and capital efficiency by more than $10 billion in 2025.”
In addition, the company will not pay its dividend in the fiscal fourth quarter of 2024 and lowered its full-year capital expenditures by more than 20%. For Q2, Intel reported a revenue of $12.83 billion — vs. the $12.94 billion expected — citing several profit-hindering factors such as the too-fast ramp up of its AI PC product, higher than expected production costs and competitive pricing from rivals like Qualcomm and AMD.
Earlier this year, the company revealed Xeon 6 server processors and a new chip called the Gaudi 3 for AI tasks, and then later in June, it announced a joint venture with Apollo in which the latter will invest $11 billion in a chip manufacturing plant in Ireland. Gelsinger admitted on an analyst call that Intel’s aggressive strategy around the production of AI-capable Core Ultra PC chips contributed to the loss but added that he believes that long-term, the “trade-offs are worth it,” claiming that the AI PC will grow from “less than 10% of the market today to greater than 50% in 2026.”
As for the job cuts, about 15,000 employees will be impacted. “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” Gelsinger wrote in a memo to the company. “Our revenues have not grown as expected — and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low.”
Other key takeaways for the second quarter include: Intel’s client segment — its largest overall business — reported a revenue of $7.4 billion, and its Data Center and AI segment brought in $3.05 billion in the quarter, below analyst expectations of $3.07 billion.
