Intel announced on Thursday that it plans to cut more than 15% of its workforce, equating to 15,000 employees, as part of a broader strategy to slash spending by $10 billion by 2025. This decision follows a disappointing second-quarter earnings report and a grim outlook.
In a memo to employees, CEO Pat Gelsinger stated, “Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. 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 emphasized Intel’s struggle to leverage the AI boom, unlike competitors such as Nvidia. While Intel was at the forefront of the CPU chip revolution 25 years ago, it has lagged in adapting to newer technological advancements like smartphones and AI. Between 2020 and 2023, Intel’s annual revenues dropped by $24 billion, despite a 10% increase in its workforce. This contrasts sharply with other chipmakers who have experienced significant revenue and valuation growth during the AI surge.
In the second quarter, Intel’s revenues declined by 1% compared to the same period last year, attributed to gross margin challenges related to its AI PC products. The company is also halting its shareholder dividend starting in the fourth quarter of 2024 and anticipates a more difficult second half of the year than previously forecasted.
Besides the layoffs, Intel plans to introduce a “voluntary departure” program next week, allowing employees to apply for exit packages. Additionally, the company will offer an enhanced retirement package for eligible staff.
