Key points:

  • Intel is cutting more than 15% of its workforce, or about 17,500 jobs.
  • The company is temporarily suspending dividend payments to shareholders.
  • Intel shares fell significantly after the release of financial results and forecasts.

In a statement released Thursday, Intel announced a major restructuring that will cut more than 15% of its workforce, or about 17,500 jobs. In parallel, the company decided to suspend dividend payments beginning in the fourth quarter of this year.

These measures are aimed at streamlining the company’s operations and focusing on addressing the problems associated with the loss-making manufacturing segment of the business.

Quarterly report triggers stock decline

The company provided third-quarter revenue guidance that was below market expectations, as it struggles to cut spending on traditional data center semiconductors and focuses on artificial intelligence chips, where it has lagged behind rivals.

The news sent shares of Santa Clara, California-based Intel tumbling 20% ​​in after-hours trading, wiping out more than $24 billion in market capitalization. The company’s common shares closed 7% lower on Thursday, reflecting a broader decline in U.S. chipmakers after Arm Holdings issued conservative guidance on Wednesday.

However, Intel’s results had little impact on the broader semiconductor industry. AI chip giant Nvidia and rival AMD both saw their shares rise in after-hours trading, highlighting their readiness to capitalize on growing demand for AI technology and contrasting with Intel’s less favorable position.

Commenting on the decision to suspend the dividend, CEO Pat Gelsinger said the company is committed to paying a competitive dividend going forward, but currently prioritizes strengthening its balance sheet and reducing debt.

Intel, which had 116,500 employees as of June 29 (excluding some subsidiaries), said the bulk of the workforce reductions will be completed by the end of 2024. In April, the company announced a quarterly dividend of 12.5 cents per share.

The company’s goals are to reduce costs and restructure

Intel is currently undergoing a major restructuring program aimed at strengthening its position in the development of advanced processors for artificial intelligence and expanding its manufacturing capacity. These measures are being taken to reduce the technological gap with Taiwanese company TSMC, which is the world leader in contract chip manufacturing.

The desire to accelerate the development of contract manufacturing has led to a significant increase in Intel’s costs and had a negative impact on the company’s profitability. In this regard, Intel management has decided to cut costs.

On Thursday, the company announced plans to cut operating expenses and capital expenditures by more than $10 billion in 2025, which is more than originally planned.

As of June 29, the company had $11.29 billion in cash and cash equivalents and about $32 billion in total current liabilities.

Intel’s lag in the AI ​​chip market has sent its shares down more than 40% this year.

The company is forecasting third-quarter revenue in the range of $12.5 billion to $13.5 billion, well below the average analyst estimate of $14.35 billion, according to LSEG. Adjusted gross margin is expected to be 38%, also well below the consensus estimate of 45.7%.