Intel Announces Major Cost Reductions, Layoffs

Intel announced that it earned a net loss of $1.7 billion on revenues of $12.8 billion for the quarter ending June 29, 2024. Revenues fell by just 0.90 percent, but Intel had earned a net income of $1.5 billion in the year-ago quarter, and the firm didn’t try to sugarcoat the gravity of problems it faces now and for the rest of the year at least.

“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” Intel CEO Pat Gelsinger said. “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 [business] transformation. These actions, combined with the launch of Intel 18A [manufacturing process] next year to regain process technology leadership, will strengthen our position in the market, improve our profitability and create shareholder value.”

Intel’s Client Computing Group delivered $7.4 billion in revenues, up 9 percent YOY. Intel said that its PC makers have shipped over 15 million AI PCs based on its chips since December 2023, and that it remained on track to ship more than 40 million by the end of 2024. Its second generation Lunar Lake chips achieved production in July, ahead of schedule, but costs associated with that ramp-up contributed to Intel’s financial struggles in the quarter.

Intel’s other two businesses, Data Center and AI, and Network Edge suffered small revenue drops in the quarter, to $3 billion and 1.3 billion, respectively. Intel now separates its Intel Foundry revenues as it were a standalone business: It landed at $4.3 billion, a gain of 4 percent YOY. “All other” revenues—from Altera, Mobileye, and Other—were down 32 percent to $968 million.

The microprocessor giant also reported that it was on track to complete its “five nodes in four years” strategy, with its Intel 18A manufacturing process scheduled to come online by the end of the year and manufacturing wafers at volume by mid-2025. The first two Intel 18A products, Panther Lake for PCs and Clearwater Forest for servers, are on track to launch in 2025 as well.

But the headwinds that Intel faces were reflected in two stark disappointments: It now expects revenues in the next two sequential quarters to come in significantly lower than originally projected, and lower than in the previous year. And it announced a massive cost-cutting program that will see Intel eliminate about 15 percent of its workforce, or over 15,000 jobs. The firm will also restructure, reduce its product count, stop non-essential work, and reduce capital expenditures with the aim of cutting costs by $10 billion next year.

“This is painful news for me to share,” Mr. Gelsinger wrote in a letter to employees. “I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history.”

Intel hopes that most of the job cuts come from early retirement and voluntary departure programs.