CEO Pat Gelsinger wrote in a memo to employees: “In short, we need to adapt our cost structure to our new operating model and fundamentally change the way we do things. Our revenue has not grown as expected—and we have not yet fully benefited from powerful trends like AI. Our costs are too high, and our margins are too low.”
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Depreciation and financial results
The company reported revenue of $12.8 billion in the second quarter, down 1% from a year earlier. It also had an earnings loss of $1.6 billion. Intel shares fell 19% in after-hours trading on the news.
The giant announced mass layoffs. The reason is the replacement of humans with artificial intelligence (photo: shutterstock)
Intel, once the world’s most dominant chipmaker, has lost its lead in recent years. The mobile computing wave of the past two decades caught the company off guard, and Intel has since been overtaken in market value by Qualcomm and Texas Instruments, which dominate mobile chips.
Intel is also struggling to keep up with its archrival, Nvidia, in AI, which has become one of the world’s most valuable public companies thanks to the AI boom. Intel’s biggest losses were in its chipmaking business, Foundry, which it had invested heavily in in 2024 “for the AI era.”
Strategic Changes and Risks
Intel plans to change its business model, focusing on producing competitor processors as a white-label factory for companies like Apple. Taiwan’s TSMC currently dominates global chip production, so Intel is betting that the world – and especially the U.S. government – will embrace another reliable chipmaker. But that plan will be incredibly expensive and involve the loss of thousands of jobs.
Intel is hoping its AI investments will pay off, with the company planning to cut $10 billion in expenses by 2025 and cut 15,000 jobs to “maintain investments to build a resilient and sustainable semiconductor supply chain in the U.S. and around the world.”
Suspension of dividends
As part of its efforts to improve its financial position, Intel will also suspend its dividend from the fourth quarter of 2024, meaning it will stop paying out the dividends it had planned to give to shareholders.
The situation on the technology market
Intel isn’t the only one struggling. Amazon’s sales rose 10% in the latest quarter and its operating profit nearly doubled, but the company’s outlook disappointed investors, sending its shares down 5% in after-hours trading.
Emarketer analyst Jacob Bourne commented on Intel's situation: "Intel's announcement of a significant cost-cutting plan, including layoffs, could help its near-term financial results, but the move alone won't be enough to redefine its position in the emerging silicon market."
