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Intel stated on Thursday that it would reduce more than 15% of its staff, or over 17,500 individuals.
Intel announced on Thursday that it would cut more than 15% of its workforce, approximately 17,500 employees, and suspend its dividend starting in the fourth quarter. These actions are part of the chipmaker’s efforts to turn around its struggling manufacturing business.
Intel also forecast third-quarter revenue below market estimates as it grapples with a pullback in spending on traditional data center semiconductors and a focus on AI chips, where it lags behind rivals.
Shares of the Santa Clara, California-based company slumped 20% in extended trade, potentially losing more than $24 billion in market value. The stock had closed down 7% on Thursday, with a plunge in U.S. chip stocks following a conservative forecast from Arm Holdings on Wednesday.
Despite Intel’s challenges, the broader chip industry remained stable. AI powerhouse Nvidia and smaller rival AMD saw after-hours gains, highlighting their stronger positioning in the AI market than Intel’s relative disadvantage.
“I need fewer people at headquarters, more people in the field, supporting customers,” CEO Pat Gelsinger told Reuters about the job cuts.
On the dividend suspension, he said, “Our objective is to … pay a competitive dividend over time, but right now, focusing on the balance sheet, deleveraging.”
Intel, which employed 116,500 people as of June 29, excluding some subsidiaries, said most of the job cuts would be completed by the end of 2024. In April, it declared a quarterly dividend of 12.5 cents per share.
Intel is in the middle of a turnaround plan focused on developing advanced AI processors and expanding its for-hire manufacturing capabilities to regain the technological edge it lost to Taiwan’s TSMC, the world’s largest contract chipmaker.
The push to energize its contracting foundry business under Gelsinger has increased Intel’s costs and pressured profit margins. More recently, the company has announced cost-cutting measures.
On Thursday, Intel announced it would cut operating expenses and reduce capital expenditure by more than $10 billion in 2025, exceeding its initial plan. “A $10 billion cost reduction plan shows that management is willing to take strong, drastic measures to right the ship and fix problems.
But we are all asking, ‘is it enough,’ and is it a bit of a late reaction considering that CEO Gelsinger has been at the helm for over three years?” said Michael Schulman, chief investment officer of Running Point Capital.
As of June 29, Intel had cash and cash equivalents of $11.29 billion and total current liabilities of about $32 billion. The company’s lagging position in the AI chip market has resulted in its shares falling more than 40% this year.
According to LSEG data, Intel expects revenue of $12.5 billion to $13.5 billion for the third quarter, compared with analysts’ average estimate of $14.35 billion. It also forecasts an adjusted gross margin of 38%, well short of market expectations of 45.7%.
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