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On Friday morning, Intel left investors reeling as the chip giant's shares fell almost 25% in a stunning plunge.
Intel left investors reeling on Friday morning as shares of the chip giant crashed roughly 25%. This dramatic drop followed Thursday’s quarterly earnings release, which was nothing short of brutal.
The company’s ticker page on Yahoo Finance became the most visited, surpassing even tech titans Amazon and Apple, which had reported better-than-expected quarters.
Intel’s performance fell significantly short of analyst estimates across key metrics, including sales, gross profit margin, and earnings.
The company cited more challenging market conditions and higher-than-expected costs associated with ramping up AI chip production as primary factors for the disappointing results.
In a drastic move to preserve liquidity, Intel announced the suspension of its dividend, effective in the fourth quarter. This decision marks the end of a long streak, as Intel had paid a dividend for 125 consecutive quarters, including $3.1 billion in 2023.
Additionally, Intel revealed plans for a 15% reduction in headcount, impacting its approximately 125,000 employees as of the end of the second quarter. The company also announced a 20% cut in capital expenditure spending for 2024 compared to previous estimates, with 2025 capital expenditure projected to be about $5 billion lower than 2024.
Intel CEO Pat Gelsinger described the restructuring as the most significant since the company’s memory microprocessor decision four decades ago.
In a live interview with Yahoo Finance, Gelsinger expressed his commitment to the company’s long-term turnaround despite the disappointing quarter and outlook. “This is what I signed up for [when I came in as CEO],” Gelsinger remarked.
The recent results and commentary have cast fresh doubt on Intel’s efforts to regain its leadership position in an industry increasingly dominated by better-performing competitors such as Nvidia and AMD.
Earlier this year, Intel secured $8.5 billion in grants and $11 billion in loans from the Biden administration to build semiconductor plants in four states.
These build-outs are part of Intel’s strategic goal to become a leading chip maker for other companies, aiming to rival industry leader Taiwan Semiconductors.
Wall Street analysts have expressed renewed concerns about Intel’s turnaround plan. JPMorgan analyst Harlan Sur noted, “This marks the third consecutive quarter of negative revenue reset and disappointing guidance, which we believe reflects the challenging industry fundamentals combined with company-specific drivers.”
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