Intel Posts $1.6 Billion Second Quarter Loss and Cuts 15,000 Jobs

After reports arose yesterday that Intel would slash jobs in an attempt to cut costs and recoup overall value, the company made these anticipated moves today alongside releasing horrible second-quarter financial results.

As part of its second-quarter financial results, Intel announced a $10 billion cost reduction plan to “increase efficiency and market competitiveness.” Unsurprisingly, a significant part of this cost reduction plan comprises cutting jobs. Intel says it will enact a 15% workforce reduction, which works out to more than 15,000 jobs.

“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. 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 IDM 2.0 transformation,” says Intel’s CEO Pat Gelsinger. “These actions, combined with the launch of Intel 18A next year to regain process technology leadership, will strengthen our position in the market, improve our profitability and create shareholder value.”

“By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet. We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders,” adds David Zinsner, Intel CFO.

Intel says that most of its layoffs will be completed by the end of 2024 and contribute “meaningfully” to the company’s goal of reducing operating expenses. The company will also reduce its capital expenditures and cost of sales while maintaining “core investments to execute strategy,” including Gelsinger’s extensive fabrication and manufacturing goals.

Intel’s net income for the second quarter was negative $1.6 billion, a significant loss compared to the company’s $1.5 billion net profit in Q2 2023. As The Verge notes, Intel’s Q1 results this year weren’t very good, either, as the company reported a $0.437 billion loss.

The Verge also published a memo sent from Gelsinger to Intel’s employees, where the beleaguered CEO explained that the company’s cost-cutting plans would result in reducing employee headcount by “roughly 15,000 roles, or 15% of our workforce.”

“This is painful news for me to share. 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,” writes Gelsinger.

The CEO adds that Intel’s revenues have not grown as expected and that the company has failed to “fully benefit from powerful trends,” including AI, something competitor Nvidia has profited from greatly. Intel’s share has shrunk as the global chip pie has gotten larger.

“Our costs are too high, our margins are too low. We need bolder actions to address both — particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected,” Gelsinger continues.

“These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career. My pledge to you is that we will prioritize a culture of honesty, transparency and respect in the weeks and months to come,” the CEO adds.

Gelsinger received a roughly 45% increase in compensation in 2023 compared to 2022, bringing his compensation to nearly $17 million, which trails behind some CEOs at similar tech companies. Gelsinger’s compensation is undercut by Intel’s stock performance. The stock value is down 39.2% so far this year and down 5.5% just today on the heels of the bad news.

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