Sluggish earnings performance, weak future outlook

Intel announced its second-quarter earnings and future outlook, and the results fell short of expectations.

The data show that Intel's second-quarter adjusted earnings per share was only $0.02, and revenue fell 0.09% year-on-year to $12.83 billion. For the third quarter guidance, Intel expects revenue to be between $12.5 billion and $13.5 billion, below analysts' expectations of $14.39 billion. Meanwhile, adjusted loss per share was $0.03 and gross margin was 38%.

Segment revenue details

In the second quarter, Intel's Customer Computing segment reported revenue of $7.41 billion, missing estimates of $7.53 billion. The Data Center and Artificial Intelligence segment reported revenue of $3.05 billion, Mobileye reported revenue of $440 million, Networking and Other reported revenue of $1.34 billion, and the Chip Foundry segment reported revenue of $4.3 billion.

Cost Control Measures and Personnel Changes

Recently, Intel announced that it will cut its workforce by 15%, or about 16,500 people, and plans to cut spending on new plants and equipment by more than 20% in 2024, with spending expected to fall to $25 billion to $27 billion. 2025 spending will fall to $20 billion to $23 billion. In addition, Intel will suspend dividend payments from the fourth quarter and prioritize liquidity to support the transition.

Market reaction and future challenges

Influenced by a number of negative factors, Intel shares plunged 10.5%. Other chip stocks were also affected, with AMD and NVIDIA shares both falling.

Intel is facing heavy challenges, and management's attempts to transform the company into a foundry of choice for advanced chip manufacturing have had limited success. CEO David Zinsner said second quarter gross margin was impacted by the accelerated rollout of AI PC products, higher expenses related to non-core businesses and idle capacity.

Expert Comments and Future Outlook

Experts noted that Intel needs to accelerate the pace of transformation to regain its edge in the competitive semiconductor market. Cutting expenses and labor costs will help boost profits and strengthen the balance sheet, but long-term investors still need to see whether the company can successfully achieve its transformation goals.