Intel's stock price fell as much as 20% after the market closed on Thursday after the company released second-quarter results that fell short of expectations and announced plans to lay off 15% of its workforce, or about 15,000 people. The company also said it would not pay a dividend for the fourth quarter of fiscal 2024, suspending dividends for the first time in 32 years.
Intel's financial report showed that in the second fiscal quarter ended June 29, the company's revenue fell 1% year-on-year. It recorded a net loss of US$1.61 billion, or 38 cents per share, in the quarter, compared with a net profit of US$1.48 billion, or 35 cents per share, in the same period last year.
Intel CEO Pat Gelsinger said on a conference call with analysts that the company's decision to speed up production of Core UltraPC chips that can handle artificial intelligence workloads was one of the reasons for the loss.
Gelsinger said: "We have previously signaled that our investment profile is strong and driving development in the AIPC space will put pressure on margins in the short term. We believe the trade-offs are worthwhile. AIPC market share will grow from less than 10% currently to more than 50% by 2026."
The company's Client Computing Group, which makes PC chips, contributed $7.41 billion in revenue, up 9% year-on-year and close to the $7.42 billion expected by analysts surveyed by StreetAccount. Intel said that performance related to AI-friendly PC chips exceeded internal expectations, and shipments are expected to exceed 40 million units in 2024.
Intel's data center and artificial intelligence division posted revenue of $3.05 billion, down 3% year over year and below the $3.14 billion average estimate of analysts polled by StreetAccount.
For the third fiscal quarter, Intel expects an adjusted net loss of 3 cents per share and revenue of $12.5 billion to $13.5 billion. Analysts polled by LSEG expected adjusted net income of 31 cents per share on revenue of $14.35 billion.
Gelsinger wrote in a memo that the layoffs will occur mainly this year and will affect about 15,000 employees. It is the largest single layoff listed on layoffs website Layoffs.fyi.
"In short, we must align our cost structure with the new operating model and fundamentally change how we operate," Gelsinger wrote. "Our revenue is not growing as expected and we have not fully benefited from powerful trends like artificial intelligence. Our costs are too high and margins are too low."
Excluding Thursday's after-hours decline, Intel shares are down 42% year to date, while the S&P 500 has gained nearly 14% during the same period.