Intel Earnings Shock Sends After-Hours Stock Plummeting 20%... "Restructuring Underway"

U.S. semiconductor company Intel reported second-quarter earnings that fell significantly short of market expectations, causing its stock price to plunge about 20% in after-hours trading. Intel also announced a major restructuring and the suspension of its dividend payment policy, which it had maintained for over 30 years.

Intel disclosed on the 1st (local time) that its second-quarter (April to June) revenue decreased by 1% compared to the same period last year. This missed both the market consensus of $12.95 billion compiled by Bloomberg and the $12.94 billion forecast by market research firm LSEG. Revenue from the data center and artificial intelligence (AI) segments, which include AI chip manufacturing, amounted to $3.05 billion, falling short of the market expectation of $3.14 billion.

Earnings per share (EPS) were recorded at $0.02, below the market forecast of $0.10. Net income turned into a net loss of $1.61 billion from a net profit of $1.48 billion in the same period last year.

Intel projected third-quarter revenue between $12.5 billion and $13.5 billion, with an EPS loss of $0.03. This falls short of market expectations of $14.35 billion in revenue and $0.31 in net income. Wall Street expects Intel's total revenue for the year to increase slightly but still remain more than $20 billion below its peak revenue in 2021.

Accordingly, Bloomberg reported that competitors in the AI chip sector, such as Nvidia and AMD, are increasingly securing Intel’s customers.

On the day, Intel’s stock closed down 5.50% on the New York Stock Exchange and then plunged about 20% in after-hours trading following the earnings announcement.

Intel announced a major restructuring plan aimed at cutting $10 billion in costs. It plans to reduce its workforce by 15%. Additionally, Intel will suspend dividend payments in the fourth quarter of fiscal year 2024 and reduce annual capital expenditures by more than 20%. Intel has paid dividends since 1992.

CEO Pat Gelsinger stated, "We need to align our cost structure with a new operating model and fundamentally change how we operate. Revenue growth has not met expectations, and we have not yet fully benefited from strong trends like AI," he added.